Correlation Between Lingsen Precision and Sunplus Technology

Can any of the company-specific risk be diversified away by investing in both Lingsen Precision and Sunplus Technology 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 Lingsen Precision and Sunplus Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lingsen Precision Industries and Sunplus Technology Co, you can compare the effects of market volatilities on Lingsen Precision and Sunplus Technology 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 Lingsen Precision with a short position of Sunplus Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lingsen Precision and Sunplus Technology.

Diversification Opportunities for Lingsen Precision and Sunplus Technology

0.6

Correlation Coefficient

Lingsen Precision  Sunplus Technology

Poor diversification

The 3 months correlation between Lingsen and Sunplus is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lingsen Precision Industries and Sunplus Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunplus Technology and Lingsen Precision 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 Lingsen Precision Industries are associated (or correlated) with Sunplus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunplus Technology has no effect on the direction of Lingsen Precision i.e., Lingsen Precision and Sunplus Technology go up and down completely randomly.

Pair Corralation between Lingsen Precision and Sunplus Technology

Assuming the 90 days trading horizon Lingsen Precision Industries is expected to generate 1.06 times more return on investment than Sunplus Technology. However, Lingsen Precision is 1.06 times more volatile than Sunplus Technology Co. It trades about 0.04 of its potential returns per unit of risk. Sunplus Technology Co is currently generating about 0.03 per unit of risk. If you would invest  1,285  in Lingsen Precision Industries on September 23, 2024 and sell it today you would earn a total of  430.00  from holding Lingsen Precision Industries or generate 33.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Lingsen Precision Industries  vs.  Sunplus Technology Co

Lingsen Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lingsen Precision Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Sunplus Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunplus Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Lingsen Precision and Sunplus Technology

The main advantage of trading using opposite Lingsen Precision and Sunplus Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lingsen Precision position performs unexpectedly, Sunplus Technology 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 Sunplus Technology will offset losses from the drop in Sunplus Technology's long position.

The idea behind Lingsen Precision Industries and Sunplus Technology Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.