Correlation Between Loctek Ergonomic and Anhui Tongguan

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

Diversification Opportunities for Loctek Ergonomic and Anhui Tongguan

0.89

Correlation Coefficient

Loctek Ergonomic  Anhui Tongguan

Very poor diversification

The 3 months correlation between Loctek and Anhui is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and Anhui Tongguan Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Tongguan Copper 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 Anhui Tongguan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Tongguan Copper has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and Anhui Tongguan go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and Anhui Tongguan

Assuming the 90 days trading horizon Loctek Ergonomic is expected to generate 1.24 times less return on investment than Anhui Tongguan. But when comparing it to its historical volatility, Loctek Ergonomic Technology is 1.01 times less risky than Anhui Tongguan. It trades about 0.07 of its potential returns per unit of risk. Anhui Tongguan Copper is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  912.00  in Anhui Tongguan Copper on September 25, 2024 and sell it today you would earn a total of  143.00  from holding Anhui Tongguan Copper or generate 15.68% return on investment over 90 days.

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

Loctek Ergonomic Technology  vs.  Anhui Tongguan Copper

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.

Anhui Tongguan Copper

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Tongguan Copper are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Tongguan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loctek Ergonomic and Anhui Tongguan

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

The idea behind Loctek Ergonomic Technology and Anhui Tongguan Copper 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.