Correlation Between Hubei Forbon and Lootom Telcovideo

Can any of the company-specific risk be diversified away by investing in both Hubei Forbon and Lootom Telcovideo 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 Hubei Forbon and Lootom Telcovideo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hubei Forbon Technology and Lootom Telcovideo Network, you can compare the effects of market volatilities on Hubei Forbon and Lootom Telcovideo 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 Hubei Forbon with a short position of Lootom Telcovideo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Forbon and Lootom Telcovideo.

Diversification Opportunities for Hubei Forbon and Lootom Telcovideo

0.84

Correlation Coefficient

Hubei Forbon  Lootom Telcovideo

Very poor diversification

The 3 months correlation between Hubei and Lootom is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Forbon Technology and Lootom Telcovideo Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lootom Telcovideo Network and Hubei Forbon 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 Hubei Forbon Technology are associated (or correlated) with Lootom Telcovideo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lootom Telcovideo Network has no effect on the direction of Hubei Forbon i.e., Hubei Forbon and Lootom Telcovideo go up and down completely randomly.

Pair Corralation between Hubei Forbon and Lootom Telcovideo

Assuming the 90 days trading horizon Hubei Forbon Technology is expected to under-perform the Lootom Telcovideo. But the stock apears to be less risky and, when comparing its historical volatility, Hubei Forbon Technology is 1.05 times less risky than Lootom Telcovideo. The stock trades about -0.03 of its potential returns per unit of risk. The Lootom Telcovideo Network is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  739.00  in Lootom Telcovideo Network on October 3, 2024 and sell it today you would earn a total of  130.00  from holding Lootom Telcovideo Network or generate 17.59% return on investment over 90 days.

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

Hubei Forbon Technology  vs.  Lootom Telcovideo Network

Hubei Forbon Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hubei Forbon 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.

Lootom Telcovideo Network

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lootom Telcovideo Network are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lootom Telcovideo sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubei Forbon and Lootom Telcovideo

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

The idea behind Hubei Forbon Technology and Lootom Telcovideo Network 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.