Correlation Between Lens Technology and China Great

Can any of the company-specific risk be diversified away by investing in both Lens Technology and China Great 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 Lens Technology and China Great into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lens Technology Co and China Great Wall, you can compare the effects of market volatilities on Lens Technology and China Great 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 Lens Technology with a short position of China Great. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lens Technology and China Great.

Diversification Opportunities for Lens Technology and China Great

0.85

Correlation Coefficient

Lens Technology  China Great

Very poor diversification

The 3 months correlation between Lens and China is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lens Technology Co and China Great Wall in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Great Wall and Lens Technology 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 Lens Technology Co are associated (or correlated) with China Great. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Great Wall has no effect on the direction of Lens Technology i.e., Lens Technology and China Great go up and down completely randomly.

Pair Corralation between Lens Technology and China Great

Assuming the 90 days trading horizon Lens Technology Co is expected to generate 1.72 times more return on investment than China Great. However, Lens Technology is 1.72 times more volatile than China Great Wall. It trades about 0.25 of its potential returns per unit of risk. China Great Wall is currently generating about 0.06 per unit of risk. If you would invest  1,980  in Lens Technology Co on September 25, 2024 and sell it today you would earn a total of  237.00  from holding Lens Technology Co or generate 11.97% return on investment over 90 days.

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

Lens Technology Co  vs.  China Great Wall

Lens Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lens Technology Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lens Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

China Great Wall

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Lens Technology and China Great

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

The idea behind Lens Technology Co and China Great Wall 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .