Correlation Between Loctek Ergonomic and CNPC Capital

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

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

Diversification Opportunities for Loctek Ergonomic and CNPC Capital

0.61

Correlation Coefficient

Loctek Ergonomic  CNPC Capital

Poor diversification

The 3 months correlation between Loctek and CNPC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and CNPC Capital Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNPC Capital and Loctek Ergonomic 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 Loctek Ergonomic Technology are associated (or correlated) with CNPC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNPC Capital has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and CNPC Capital go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and CNPC Capital

Assuming the 90 days trading horizon Loctek Ergonomic Technology is expected to under-perform the CNPC Capital. In addition to that, Loctek Ergonomic is 1.88 times more volatile than CNPC Capital Co. It trades about -0.16 of its total potential returns per unit of risk. CNPC Capital Co is currently generating about -0.11 per unit of volatility. If you would invest  734.00  in CNPC Capital Co on September 25, 2024 and sell it today you would lose (26.00) from holding CNPC Capital Co or give up 3.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Loctek Ergonomic Technology  vs.  CNPC Capital Co

Loctek Ergonomic Tec

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Loctek Ergonomic Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Loctek Ergonomic sustained solid returns over the last few months and may actually be approaching a breakup point.

CNPC Capital

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CNPC Capital Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CNPC Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loctek Ergonomic and CNPC Capital

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

The idea behind Loctek Ergonomic Technology and CNPC Capital 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.