Correlation Between Lecron Energy and Guangdong Transtek

Can any of the company-specific risk be diversified away by investing in both Lecron Energy and Guangdong Transtek 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 Guangdong Transtek 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 Guangdong Transtek Medical, you can compare the effects of market volatilities on Lecron Energy and Guangdong Transtek 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 Guangdong Transtek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lecron Energy and Guangdong Transtek.

Diversification Opportunities for Lecron Energy and Guangdong Transtek

0.77

Correlation Coefficient

Lecron Energy  Guangdong Transtek

Poor diversification

The 3 months correlation between Lecron and Guangdong is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lecron Energy Saving and Guangdong Transtek Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Transtek 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 Guangdong Transtek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Transtek has no effect on the direction of Lecron Energy i.e., Lecron Energy and Guangdong Transtek go up and down completely randomly.

Pair Corralation between Lecron Energy and Guangdong Transtek

Assuming the 90 days trading horizon Lecron Energy Saving is expected to under-perform the Guangdong Transtek. In addition to that, Lecron Energy is 1.15 times more volatile than Guangdong Transtek Medical. It trades about -0.09 of its total potential returns per unit of risk. Guangdong Transtek Medical is currently generating about -0.01 per unit of volatility. If you would invest  1,561  in Guangdong Transtek Medical on December 26, 2024 and sell it today you would lose (83.00) from holding Guangdong Transtek Medical or give up 5.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.25%
Values	Daily Returns

Lecron Energy Saving  vs.  Guangdong Transtek Medical

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.

Guangdong Transtek

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Transtek Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangdong Transtek 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 Guangdong Transtek

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

The idea behind Lecron Energy Saving and Guangdong Transtek Medical 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.