Correlation Between Loctek Ergonomic and Jiangsu Xinning

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

Diversification Opportunities for Loctek Ergonomic and Jiangsu Xinning

0.7

Correlation Coefficient

Loctek Ergonomic  Jiangsu Xinning

Poor diversification

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

Pair Corralation between Loctek Ergonomic and Jiangsu Xinning

Assuming the 90 days trading horizon Loctek Ergonomic Technology is expected to under-perform the Jiangsu Xinning. But the stock apears to be less risky and, when comparing its historical volatility, Loctek Ergonomic Technology is 1.62 times less risky than Jiangsu Xinning. The stock trades about -0.03 of its potential returns per unit of risk. The Jiangsu Xinning Modern is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  325.00  in Jiangsu Xinning Modern on September 27, 2024 and sell it today you would earn a total of  57.00  from holding Jiangsu Xinning Modern or generate 17.54% 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.  Jiangsu Xinning Modern

Loctek Ergonomic Tec

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Loctek Ergonomic Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Jiangsu Xinning Modern

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Xinning Modern are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Xinning sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loctek Ergonomic and Jiangsu Xinning

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

The idea behind Loctek Ergonomic Technology and Jiangsu Xinning Modern 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 Transaction History module to view history of all your transactions and understand their impact on performance.