Correlation Between Loctek Ergonomic and Sichuan Teway

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

Diversification Opportunities for Loctek Ergonomic and Sichuan Teway

0.69

Correlation Coefficient

Loctek Ergonomic  Sichuan Teway

Poor diversification

The 3 months correlation between Loctek and Sichuan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and Sichuan Teway Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Teway Food 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 Sichuan Teway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Teway Food has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and Sichuan Teway go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and Sichuan Teway

Assuming the 90 days trading horizon Loctek Ergonomic is expected to generate 3.1 times less return on investment than Sichuan Teway. But when comparing it to its historical volatility, Loctek Ergonomic Technology is 1.04 times less risky than Sichuan Teway. It trades about 0.02 of its potential returns per unit of risk. Sichuan Teway Food is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,156  in Sichuan Teway Food on September 29, 2024 and sell it today you would earn a total of  198.00  from holding Sichuan Teway Food or generate 17.13% 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.  Sichuan Teway Food

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.

Sichuan Teway Food

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Loctek Ergonomic and Sichuan Teway

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

The idea behind Loctek Ergonomic Technology and Sichuan Teway Food 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 Global Correlations module to find global opportunities by holding instruments from different markets.