Correlation Between Lecron Energy and Guosheng Financial

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

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

Diversification Opportunities for Lecron Energy and Guosheng Financial

0.37

Correlation Coefficient

Lecron Energy  Guosheng Financial

Weak diversification

The 3 months correlation between Lecron and Guosheng is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lecron Energy Saving and Guosheng Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guosheng Financial and Lecron Energy 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 Lecron Energy Saving are associated (or correlated) with Guosheng Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guosheng Financial has no effect on the direction of Lecron Energy i.e., Lecron Energy and Guosheng Financial go up and down completely randomly.

Pair Corralation between Lecron Energy and Guosheng Financial

Assuming the 90 days trading horizon Lecron Energy Saving is expected to under-perform the Guosheng Financial. In addition to that, Lecron Energy is 1.46 times more volatile than Guosheng Financial Holding. It trades about -0.14 of its total potential returns per unit of risk. Guosheng Financial Holding is currently generating about 0.01 per unit of volatility. If you would invest  1,345  in Guosheng Financial Holding on December 26, 2024 and sell it today you would lose (19.00) from holding Guosheng Financial Holding or give up 1.41% of portfolio value over 90 days.

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

Lecron Energy Saving  vs.  Guosheng Financial Holding

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.

Guosheng Financial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Lecron Energy and Guosheng Financial

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

The idea behind Lecron Energy Saving and Guosheng Financial Holding 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.