Correlation Between Loctek Ergonomic and Guangdong Liantai

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

Diversification Opportunities for Loctek Ergonomic and Guangdong Liantai

0.65

Correlation Coefficient

Loctek Ergonomic  Guangdong Liantai

Poor diversification

The 3 months correlation between Loctek and Guangdong is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and Guangdong Liantai Environmenta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Liantai 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 Guangdong Liantai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Liantai has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and Guangdong Liantai go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and Guangdong Liantai

Assuming the 90 days trading horizon Loctek Ergonomic Technology is expected to under-perform the Guangdong Liantai. In addition to that, Loctek Ergonomic is 1.18 times more volatile than Guangdong Liantai Environmental. It trades about -0.01 of its total potential returns per unit of risk. Guangdong Liantai Environmental is currently generating about 0.05 per unit of volatility. If you would invest  326.00  in Guangdong Liantai Environmental on October 13, 2024 and sell it today you would earn a total of  48.00  from holding Guangdong Liantai Environmental or generate 14.72% 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.  Guangdong Liantai Environmenta

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.

Guangdong Liantai

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Liantai Environmental are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guangdong Liantai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Loctek Ergonomic and Guangdong Liantai

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

The idea behind Loctek Ergonomic Technology and Guangdong Liantai Environmental 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.