Correlation Between Lepu Medical and Jiangsu Broadcasting

Can any of the company-specific risk be diversified away by investing in both Lepu Medical and Jiangsu Broadcasting 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 Lepu Medical and Jiangsu Broadcasting into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lepu Medical Tech and Jiangsu Broadcasting Cable, you can compare the effects of market volatilities on Lepu Medical and Jiangsu Broadcasting 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 Lepu Medical with a short position of Jiangsu Broadcasting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lepu Medical and Jiangsu Broadcasting.

Diversification Opportunities for Lepu Medical and Jiangsu Broadcasting

0.34

Correlation Coefficient

Lepu Medical  Jiangsu Broadcasting

Weak diversification

The 3 months correlation between Lepu and Jiangsu is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Lepu Medical Tech and Jiangsu Broadcasting Cable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Broadcasting and Lepu Medical 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 Lepu Medical Tech are associated (or correlated) with Jiangsu Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Broadcasting has no effect on the direction of Lepu Medical i.e., Lepu Medical and Jiangsu Broadcasting go up and down completely randomly.

Pair Corralation between Lepu Medical and Jiangsu Broadcasting

Assuming the 90 days trading horizon Lepu Medical Tech is expected to under-perform the Jiangsu Broadcasting. In addition to that, Lepu Medical is 1.38 times more volatile than Jiangsu Broadcasting Cable. It trades about -0.04 of its total potential returns per unit of risk. Jiangsu Broadcasting Cable is currently generating about 0.02 per unit of volatility. If you would invest  299.00  in Jiangsu Broadcasting Cable on October 4, 2024 and sell it today you would earn a total of  36.00  from holding Jiangsu Broadcasting Cable or generate 12.04% return on investment over 90 days.

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

Lepu Medical Tech  vs.  Jiangsu Broadcasting Cable

Lepu Medical Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lepu Medical Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Jiangsu Broadcasting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangsu Broadcasting Cable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiangsu Broadcasting is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lepu Medical and Jiangsu Broadcasting

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

The idea behind Lepu Medical Tech and Jiangsu Broadcasting Cable 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.