Correlation Between Lingsen Precision and Great China

Can any of the company-specific risk be diversified away by investing in both Lingsen Precision and Great China 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 Great China 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 Great China Metal, you can compare the effects of market volatilities on Lingsen Precision and Great China 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 Great China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lingsen Precision and Great China.

Diversification Opportunities for Lingsen Precision and Great China

0.27

Correlation Coefficient

Lingsen Precision  Great China

Modest diversification

The 3 months correlation between Lingsen and Great is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lingsen Precision Industries and Great China Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great China Metal 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 Great China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great China Metal has no effect on the direction of Lingsen Precision i.e., Lingsen Precision and Great China go up and down completely randomly.

Pair Corralation between Lingsen Precision and Great China

Assuming the 90 days trading horizon Lingsen Precision Industries is expected to generate 5.7 times more return on investment than Great China. However, Lingsen Precision is 5.7 times more volatile than Great China Metal. It trades about 0.03 of its potential returns per unit of risk. Great China Metal is currently generating about 0.0 per unit of risk. If you would invest  1,458  in Lingsen Precision Industries on October 26, 2024 and sell it today you would earn a total of  277.00  from holding Lingsen Precision Industries or generate 19.0% return on investment over 90 days.

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

Lingsen Precision Industries  vs.  Great China Metal

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Great China Metal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Great China Metal are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Great China is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lingsen Precision and Great China

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

The idea behind Lingsen Precision Industries and Great China Metal 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.