Correlation Between Changsha Jingjia and Loongson Technology

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

By analyzing existing cross correlation between Changsha Jingjia Microelectronics and Loongson Technology Corp, you can compare the effects of market volatilities on Changsha Jingjia and Loongson Technology 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 Changsha Jingjia with a short position of Loongson Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changsha Jingjia and Loongson Technology.

Diversification Opportunities for Changsha Jingjia and Loongson Technology

0.58

Correlation Coefficient

Changsha Jingjia  Loongson Technology

Very weak diversification

The 3 months correlation between Changsha and Loongson is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Changsha Jingjia Microelectron and Loongson Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loongson Technology Corp and Changsha Jingjia 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 Changsha Jingjia Microelectronics are associated (or correlated) with Loongson Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loongson Technology Corp has no effect on the direction of Changsha Jingjia i.e., Changsha Jingjia and Loongson Technology go up and down completely randomly.

Pair Corralation between Changsha Jingjia and Loongson Technology

Assuming the 90 days trading horizon Changsha Jingjia is expected to generate 1.6 times less return on investment than Loongson Technology. In addition to that, Changsha Jingjia is 1.03 times more volatile than Loongson Technology Corp. It trades about 0.03 of its total potential returns per unit of risk. Loongson Technology Corp is currently generating about 0.05 per unit of volatility. If you would invest  9,018  in Loongson Technology Corp on October 6, 2024 and sell it today you would earn a total of  3,343  from holding Loongson Technology Corp or generate 37.07% return on investment over 90 days.

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

Changsha Jingjia Microelectron  vs.  Loongson Technology Corp

Changsha Jingjia Mic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Loongson Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loongson Technology Corp 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.

Pair Trading with Changsha Jingjia and Loongson Technology

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

The idea behind Changsha Jingjia Microelectronics and Loongson Technology Corp 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.