Correlation Between Shenzhen Changfang and Lecron Energy

Can any of the company-specific risk be diversified away by investing in both Shenzhen Changfang and Lecron Energy 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 Shenzhen Changfang and Lecron Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Changfang Light and Lecron Energy Saving, you can compare the effects of market volatilities on Shenzhen Changfang and Lecron Energy 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 Shenzhen Changfang with a short position of Lecron Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Changfang and Lecron Energy.

Diversification Opportunities for Shenzhen Changfang and Lecron Energy

-0.42

Correlation Coefficient

Shenzhen Changfang  Lecron Energy

Very good diversification

The 3 months correlation between Shenzhen and Lecron is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Changfang Light and Lecron Energy Saving in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lecron Energy Saving and Shenzhen Changfang 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 Shenzhen Changfang Light are associated (or correlated) with Lecron Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lecron Energy Saving has no effect on the direction of Shenzhen Changfang i.e., Shenzhen Changfang and Lecron Energy go up and down completely randomly.

Pair Corralation between Shenzhen Changfang and Lecron Energy

Assuming the 90 days trading horizon Shenzhen Changfang Light is expected to generate 0.58 times more return on investment than Lecron Energy. However, Shenzhen Changfang Light is 1.72 times less risky than Lecron Energy. It trades about 0.17 of its potential returns per unit of risk. Lecron Energy Saving is currently generating about -0.14 per unit of risk. If you would invest  165.00  in Shenzhen Changfang Light on December 26, 2024 and sell it today you would earn a total of  44.00  from holding Shenzhen Changfang Light or generate 26.67% return on investment over 90 days.

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

Shenzhen Changfang Light  vs.  Lecron Energy Saving

Shenzhen Changfang Light

Risk-Adjusted Performance

Good

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

Lecron Energy Saving

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lecron Energy Saving 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shenzhen Changfang and Lecron Energy

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

The idea behind Shenzhen Changfang Light and Lecron Energy Saving 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.