Correlation Between Winner Information and Lutian Machinery

Can any of the company-specific risk be diversified away by investing in both Winner Information and Lutian Machinery 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 Winner Information and Lutian Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Winner Information and Lutian Machinery

-0.57

Correlation Coefficient

Winner Information  Lutian Machinery

Excellent diversification

The 3 months correlation between Winner and Lutian is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Winner Information Technology and Lutian Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lutian Machinery and Winner Information 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 Winner Information Technology are associated (or correlated) with Lutian Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lutian Machinery has no effect on the direction of Winner Information i.e., Winner Information and Lutian Machinery go up and down completely randomly.

Pair Corralation between Winner Information and Lutian Machinery

Assuming the 90 days trading horizon Winner Information Technology is expected to under-perform the Lutian Machinery. In addition to that, Winner Information is 2.72 times more volatile than Lutian Machinery Co. It trades about -0.21 of its total potential returns per unit of risk. Lutian Machinery Co is currently generating about -0.08 per unit of volatility. If you would invest  1,569  in Lutian Machinery Co on October 11, 2024 and sell it today you would lose (49.00) from holding Lutian Machinery Co or give up 3.12% of portfolio value over 90 days.

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

Winner Information Technology  vs.  Lutian Machinery Co

Winner Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winner Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lutian Machinery

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lutian Machinery Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lutian Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Winner Information and Lutian Machinery

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

The idea behind Winner Information Technology and Lutian Machinery Co 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.