Correlation Between Malion New and Linzhou Heavy

Can any of the company-specific risk be diversified away by investing in both Malion New and Linzhou Heavy 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 Malion New and Linzhou Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Malion New Materials and Linzhou Heavy Machinery, you can compare the effects of market volatilities on Malion New and Linzhou Heavy 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 Malion New with a short position of Linzhou Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malion New and Linzhou Heavy.

Diversification Opportunities for Malion New and Linzhou Heavy

0.91

Correlation Coefficient

Malion New  Linzhou Heavy

Almost no diversification

The 3 months correlation between Malion and Linzhou is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Malion New Materials and Linzhou Heavy Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linzhou Heavy Machinery and Malion New 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 Malion New Materials are associated (or correlated) with Linzhou Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linzhou Heavy Machinery has no effect on the direction of Malion New i.e., Malion New and Linzhou Heavy go up and down completely randomly.

Pair Corralation between Malion New and Linzhou Heavy

Assuming the 90 days trading horizon Malion New Materials is expected to generate 1.67 times more return on investment than Linzhou Heavy. However, Malion New is 1.67 times more volatile than Linzhou Heavy Machinery. It trades about 0.0 of its potential returns per unit of risk. Linzhou Heavy Machinery is currently generating about -0.03 per unit of risk. If you would invest  869.00  in Malion New Materials on October 3, 2024 and sell it today you would lose (55.00) from holding Malion New Materials or give up 6.33% of portfolio value over 90 days.

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

Malion New Materials  vs.  Linzhou Heavy Machinery

Malion New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Linzhou Heavy Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Malion New and Linzhou Heavy

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

The idea behind Malion New Materials and Linzhou Heavy Machinery 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.