Correlation Between Longmaster Information and Sichuan Furong

Can any of the company-specific risk be diversified away by investing in both Longmaster Information and Sichuan Furong 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 Longmaster Information and Sichuan Furong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Longmaster Information Tech and Sichuan Furong Technology, you can compare the effects of market volatilities on Longmaster Information and Sichuan Furong 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 Longmaster Information with a short position of Sichuan Furong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longmaster Information and Sichuan Furong.

Diversification Opportunities for Longmaster Information and Sichuan Furong

0.17

Correlation Coefficient

Longmaster Information  Sichuan Furong

Average diversification

The 3 months correlation between Longmaster and Sichuan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Longmaster Information Tech and Sichuan Furong Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Furong Technology and Longmaster Information 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 Longmaster Information Tech are associated (or correlated) with Sichuan Furong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Furong Technology has no effect on the direction of Longmaster Information i.e., Longmaster Information and Sichuan Furong go up and down completely randomly.

Pair Corralation between Longmaster Information and Sichuan Furong

Assuming the 90 days trading horizon Longmaster Information Tech is expected to under-perform the Sichuan Furong. In addition to that, Longmaster Information is 1.32 times more volatile than Sichuan Furong Technology. It trades about -0.38 of its total potential returns per unit of risk. Sichuan Furong Technology is currently generating about -0.26 per unit of volatility. If you would invest  1,331  in Sichuan Furong Technology on October 10, 2024 and sell it today you would lose (177.00) from holding Sichuan Furong Technology or give up 13.3% of portfolio value over 90 days.

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

Longmaster Information Tech  vs.  Sichuan Furong Technology

Longmaster Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sichuan Furong Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sichuan Furong Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Longmaster Information and Sichuan Furong

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

The idea behind Longmaster Information Tech and Sichuan Furong Technology 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.