Correlation Between INSUN Environmental and LEENO Industrial

Can any of the company-specific risk be diversified away by investing in both INSUN Environmental and LEENO Industrial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining INSUN Environmental and LEENO Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INSUN Environmental New and LEENO Industrial, you can compare the effects of market volatilities on INSUN Environmental and LEENO Industrial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in INSUN Environmental with a short position of LEENO Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of INSUN Environmental and LEENO Industrial.

Diversification Opportunities for INSUN Environmental and LEENO Industrial

0.84

Correlation Coefficient

INSUN Environmental  LEENO Industrial

Very poor diversification

The 3 months correlation between INSUN and LEENO is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding INSUN Environmental New and LEENO Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEENO Industrial and INSUN Environmental is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on INSUN Environmental New are associated (or correlated) with LEENO Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEENO Industrial has no effect on the direction of INSUN Environmental i.e., INSUN Environmental and LEENO Industrial go up and down completely randomly.

Pair Corralation between INSUN Environmental and LEENO Industrial

Assuming the 90 days trading horizon INSUN Environmental is expected to generate 2.75 times less return on investment than LEENO Industrial. In addition to that, INSUN Environmental is 1.41 times more volatile than LEENO Industrial. It trades about 0.12 of its total potential returns per unit of risk. LEENO Industrial is currently generating about 0.45 per unit of volatility. If you would invest  15,192,500  in LEENO Industrial on October 1, 2024 and sell it today you would earn a total of  4,007,500  from holding LEENO Industrial or generate 26.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

INSUN Environmental New  vs.  LEENO Industrial

INSUN Environmental New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INSUN Environmental New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

LEENO Industrial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LEENO Industrial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, LEENO Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with INSUN Environmental and LEENO Industrial

The main advantage of trading using opposite INSUN Environmental and LEENO Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INSUN Environmental position performs unexpectedly, LEENO Industrial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in LEENO Industrial will offset losses from the drop in LEENO Industrial's long position.

The idea behind INSUN Environmental New and LEENO Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.