Correlation Between Loctek Ergonomic and AVIC UAS

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

Diversification Opportunities for Loctek Ergonomic and AVIC UAS

0.38

Correlation Coefficient

Loctek Ergonomic  AVIC UAS

Weak diversification

The 3 months correlation between Loctek and AVIC is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and AVIC UAS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVIC UAS 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 AVIC UAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVIC UAS has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and AVIC UAS go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and AVIC UAS

Assuming the 90 days trading horizon Loctek Ergonomic Technology is expected to generate 0.64 times more return on investment than AVIC UAS. However, Loctek Ergonomic Technology is 1.55 times less risky than AVIC UAS. It trades about -0.25 of its potential returns per unit of risk. AVIC UAS Co is currently generating about -0.18 per unit of risk. If you would invest  1,691  in Loctek Ergonomic Technology on October 5, 2024 and sell it today you would lose (187.00) from holding Loctek Ergonomic Technology or give up 11.06% of portfolio value over 90 days.

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

Loctek Ergonomic Technology  vs.  AVIC UAS Co

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

AVIC UAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVIC UAS Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Loctek Ergonomic and AVIC UAS

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

The idea behind Loctek Ergonomic Technology and AVIC UAS Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.