Correlation Between Loctek Ergonomic and Penyao Environmental

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

Diversification Opportunities for Loctek Ergonomic and Penyao Environmental

0.47

Correlation Coefficient

Loctek Ergonomic  Penyao Environmental

Very weak diversification

The 3 months correlation between Loctek and Penyao is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and Penyao Environmental Protectio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penyao Environmental 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 Penyao Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penyao Environmental has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and Penyao Environmental go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and Penyao Environmental

Assuming the 90 days trading horizon Loctek Ergonomic Technology is expected to under-perform the Penyao Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Loctek Ergonomic Technology is 1.58 times less risky than Penyao Environmental. The stock trades about -0.02 of its potential returns per unit of risk. The Penyao Environmental Protection is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  493.00  in Penyao Environmental Protection on October 10, 2024 and sell it today you would earn a total of  36.00  from holding Penyao Environmental Protection or generate 7.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Loctek Ergonomic Technology  vs.  Penyao Environmental Protectio

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.

Penyao Environmental

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penyao Environmental Protection are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Penyao Environmental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Loctek Ergonomic and Penyao Environmental

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

The idea behind Loctek Ergonomic Technology and Penyao Environmental Protection 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.