Correlation Between Loctek Ergonomic and ACM Research

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

Diversification Opportunities for Loctek Ergonomic and ACM Research

0.82

Correlation Coefficient

Loctek Ergonomic  ACM Research

Very poor diversification

The 3 months correlation between Loctek and ACM is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and ACM Research Shanghai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACM Research Shanghai 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 ACM Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACM Research Shanghai has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and ACM Research go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and ACM Research

Assuming the 90 days trading horizon Loctek Ergonomic Technology is expected to generate 1.28 times more return on investment than ACM Research. However, Loctek Ergonomic is 1.28 times more volatile than ACM Research Shanghai. It trades about -0.09 of its potential returns per unit of risk. ACM Research Shanghai is currently generating about -0.12 per unit of risk. If you would invest  1,727  in Loctek Ergonomic Technology on September 24, 2024 and sell it today you would lose (87.00) from holding Loctek Ergonomic Technology or give up 5.04% of portfolio value over 90 days.

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

Loctek Ergonomic Technology  vs.  ACM Research Shanghai

Loctek Ergonomic Tec

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loctek Ergonomic Technology are ranked lower than 6 (%) 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.

ACM Research Shanghai

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ACM Research Shanghai are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ACM Research sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loctek Ergonomic and ACM Research

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

The idea behind Loctek Ergonomic Technology and ACM Research Shanghai 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.