Correlation Between U Ming and LK Engineering

Can any of the company-specific risk be diversified away by investing in both U Ming and LK Engineering 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 U Ming and LK Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between U Ming Marine Transport and LK Engineering Co, you can compare the effects of market volatilities on U Ming and LK Engineering 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 U Ming with a short position of LK Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and LK Engineering.

Diversification Opportunities for U Ming and LK Engineering

0.85

Correlation Coefficient

U Ming  LK Engineering

Very poor diversification

The 3 months correlation between 2606 and 6139 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and LK Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LK Engineering and U Ming 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 U Ming Marine Transport are associated (or correlated) with LK Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LK Engineering has no effect on the direction of U Ming i.e., U Ming and LK Engineering go up and down completely randomly.

Pair Corralation between U Ming and LK Engineering

Assuming the 90 days trading horizon U Ming Marine Transport is expected to generate 1.43 times more return on investment than LK Engineering. However, U Ming is 1.43 times more volatile than LK Engineering Co. It trades about 0.11 of its potential returns per unit of risk. LK Engineering Co is currently generating about 0.13 per unit of risk. If you would invest  5,890  in U Ming Marine Transport on December 28, 2024 and sell it today you would earn a total of  1,010  from holding U Ming Marine Transport or generate 17.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.21%
Values	Daily Returns

U Ming Marine Transport  vs.  LK Engineering Co

U Ming Marine

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming showed solid returns over the last few months and may actually be approaching a breakup point.

LK Engineering

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LK Engineering Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LK Engineering showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Ming and LK Engineering

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

The idea behind U Ming Marine Transport and LK Engineering 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.