Correlation Between Loctek Ergonomic and ZJBC Information

Can any of the company-specific risk be diversified away by investing in both Loctek Ergonomic and ZJBC Information 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 ZJBC Information 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 ZJBC Information Technology, you can compare the effects of market volatilities on Loctek Ergonomic and ZJBC Information 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 ZJBC Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loctek Ergonomic and ZJBC Information.

Diversification Opportunities for Loctek Ergonomic and ZJBC Information

0.68

Correlation Coefficient

Loctek Ergonomic  ZJBC Information

Poor diversification

The 3 months correlation between Loctek and ZJBC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and ZJBC Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZJBC Information Tec 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 ZJBC Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZJBC Information Tec has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and ZJBC Information go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and ZJBC Information

Assuming the 90 days trading horizon Loctek Ergonomic is expected to generate 1.15 times less return on investment than ZJBC Information. In addition to that, Loctek Ergonomic is 1.03 times more volatile than ZJBC Information Technology. It trades about 0.04 of its total potential returns per unit of risk. ZJBC Information Technology is currently generating about 0.04 per unit of volatility. If you would invest  189.00  in ZJBC Information Technology on September 21, 2024 and sell it today you would earn a total of  88.00  from holding ZJBC Information Technology or generate 46.56% return on investment over 90 days.

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

Loctek Ergonomic Technology  vs.  ZJBC Information Technology

Loctek Ergonomic Tec

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loctek Ergonomic Technology are ranked lower than 7 (%) 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.

ZJBC Information Tec

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ZJBC Information Technology are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZJBC Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loctek Ergonomic and ZJBC Information

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

The idea behind Loctek Ergonomic Technology and ZJBC Information 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.