Correlation Between Guangdong Transtek and Lecron Energy

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

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

Diversification Opportunities for Guangdong Transtek and Lecron Energy

0.54

Correlation Coefficient

Guangdong Transtek  Lecron Energy

Very weak diversification

The 3 months correlation between Guangdong and Lecron is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Transtek Medical and Lecron Energy Saving in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lecron Energy Saving and Guangdong Transtek 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 Guangdong Transtek Medical are associated (or correlated) with Lecron Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lecron Energy Saving has no effect on the direction of Guangdong Transtek i.e., Guangdong Transtek and Lecron Energy go up and down completely randomly.

Pair Corralation between Guangdong Transtek and Lecron Energy

Assuming the 90 days trading horizon Guangdong Transtek Medical is expected to generate 1.1 times more return on investment than Lecron Energy. However, Guangdong Transtek is 1.1 times more volatile than Lecron Energy Saving. It trades about 0.02 of its potential returns per unit of risk. Lecron Energy Saving is currently generating about 0.01 per unit of risk. If you would invest  1,232  in Guangdong Transtek Medical on October 11, 2024 and sell it today you would earn a total of  6.00  from holding Guangdong Transtek Medical or generate 0.49% return on investment over 90 days.

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

Guangdong Transtek Medical  vs.  Lecron Energy Saving

Guangdong Transtek

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Transtek Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Transtek may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lecron Energy Saving

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Lecron Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangdong Transtek and Lecron Energy

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

The idea behind Guangdong Transtek Medical and Lecron Energy Saving 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.