Correlation Between Jiangsu Jinling and Loctek Ergonomic

Can any of the company-specific risk be diversified away by investing in both Jiangsu Jinling and Loctek Ergonomic 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 Jiangsu Jinling and Loctek Ergonomic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangsu Jinling Sports and Loctek Ergonomic Technology, you can compare the effects of market volatilities on Jiangsu Jinling and Loctek Ergonomic 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 Jiangsu Jinling with a short position of Loctek Ergonomic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Jinling and Loctek Ergonomic.

Diversification Opportunities for Jiangsu Jinling and Loctek Ergonomic

0.7

Correlation Coefficient

Jiangsu Jinling  Loctek Ergonomic

Poor diversification

The 3 months correlation between Jiangsu and Loctek is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Jinling Sports and Loctek Ergonomic Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loctek Ergonomic Tec and Jiangsu Jinling 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 Jiangsu Jinling Sports are associated (or correlated) with Loctek Ergonomic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loctek Ergonomic Tec has no effect on the direction of Jiangsu Jinling i.e., Jiangsu Jinling and Loctek Ergonomic go up and down completely randomly.

Pair Corralation between Jiangsu Jinling and Loctek Ergonomic

Assuming the 90 days trading horizon Jiangsu Jinling is expected to generate 4.53 times less return on investment than Loctek Ergonomic. In addition to that, Jiangsu Jinling is 1.22 times more volatile than Loctek Ergonomic Technology. It trades about 0.01 of its total potential returns per unit of risk. Loctek Ergonomic Technology is currently generating about 0.06 per unit of volatility. If you would invest  1,310  in Loctek Ergonomic Technology on October 21, 2024 and sell it today you would earn a total of  223.00  from holding Loctek Ergonomic Technology or generate 17.02% return on investment over 90 days.

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

Jiangsu Jinling Sports  vs.  Loctek Ergonomic Technology

Jiangsu Jinling Sports

Risk-Adjusted Performance

0 of 100

Very Weak

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

Loctek Ergonomic Tec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jiangsu Jinling and Loctek Ergonomic

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

The idea behind Jiangsu Jinling Sports and Loctek Ergonomic Technology 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.