Correlation Between Longmaster Information and Jiangsu Rongtai

Can any of the company-specific risk be diversified away by investing in both Longmaster Information and Jiangsu Rongtai 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 Jiangsu Rongtai 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 Jiangsu Rongtai Industry, you can compare the effects of market volatilities on Longmaster Information and Jiangsu Rongtai 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 Jiangsu Rongtai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longmaster Information and Jiangsu Rongtai.

Diversification Opportunities for Longmaster Information and Jiangsu Rongtai

0.47

Correlation Coefficient

Longmaster Information  Jiangsu Rongtai

Very weak diversification

The 3 months correlation between Longmaster and Jiangsu is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Longmaster Information Tech and Jiangsu Rongtai Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Rongtai Industry 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 Jiangsu Rongtai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Rongtai Industry has no effect on the direction of Longmaster Information i.e., Longmaster Information and Jiangsu Rongtai go up and down completely randomly.

Pair Corralation between Longmaster Information and Jiangsu Rongtai

Assuming the 90 days trading horizon Longmaster Information is expected to generate 146.3 times less return on investment than Jiangsu Rongtai. But when comparing it to its historical volatility, Longmaster Information Tech is 1.03 times less risky than Jiangsu Rongtai. It trades about 0.0 of its potential returns per unit of risk. Jiangsu Rongtai Industry is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,530  in Jiangsu Rongtai Industry on December 27, 2024 and sell it today you would earn a total of  1,040  from holding Jiangsu Rongtai Industry or generate 41.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Longmaster Information Tech  vs.  Jiangsu Rongtai Industry

Longmaster Information

Risk-Adjusted Performance

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.

Jiangsu Rongtai Industry

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Rongtai Industry are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Rongtai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Longmaster Information and Jiangsu Rongtai

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

The idea behind Longmaster Information Tech and Jiangsu Rongtai Industry 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.