Correlation Between Gifore Agricultural and Luolai Home

Can any of the company-specific risk be diversified away by investing in both Gifore Agricultural and Luolai Home 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 Gifore Agricultural and Luolai Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gifore Agricultural Machinery and Luolai Home Textile, you can compare the effects of market volatilities on Gifore Agricultural and Luolai Home 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 Gifore Agricultural with a short position of Luolai Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gifore Agricultural and Luolai Home.

Diversification Opportunities for Gifore Agricultural and Luolai Home

0.86

Correlation Coefficient

Gifore Agricultural  Luolai Home

Very poor diversification

The 3 months correlation between Gifore and Luolai is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Gifore Agricultural Machinery and Luolai Home Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luolai Home Textile and Gifore Agricultural 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 Gifore Agricultural Machinery are associated (or correlated) with Luolai Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luolai Home Textile has no effect on the direction of Gifore Agricultural i.e., Gifore Agricultural and Luolai Home go up and down completely randomly.

Pair Corralation between Gifore Agricultural and Luolai Home

Assuming the 90 days trading horizon Gifore Agricultural Machinery is expected to generate 1.38 times more return on investment than Luolai Home. However, Gifore Agricultural is 1.38 times more volatile than Luolai Home Textile. It trades about 0.2 of its potential returns per unit of risk. Luolai Home Textile is currently generating about 0.2 per unit of risk. If you would invest  371.00  in Gifore Agricultural Machinery on September 20, 2024 and sell it today you would earn a total of  191.00  from holding Gifore Agricultural Machinery or generate 51.48% return on investment over 90 days.

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

Gifore Agricultural Machinery  vs.  Luolai Home Textile

Gifore Agricultural

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gifore Agricultural Machinery are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gifore Agricultural sustained solid returns over the last few months and may actually be approaching a breakup point.

Luolai Home Textile

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luolai Home Textile are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Luolai Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gifore Agricultural and Luolai Home

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

The idea behind Gifore Agricultural Machinery and Luolai Home Textile 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.