Correlation Between YiDong Electronics and Lecron Energy

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Can any of the company-specific risk be diversified away by investing in both YiDong Electronics and Lecron Energy 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 YiDong Electronics and Lecron Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between YiDong Electronics Technology and Lecron Energy Saving, you can compare the effects of market volatilities on YiDong Electronics and Lecron Energy 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 YiDong Electronics with a short position of Lecron Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of YiDong Electronics and Lecron Energy.

Diversification Opportunities for YiDong Electronics and Lecron Energy

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between YiDong and Lecron is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding YiDong Electronics Technology and Lecron Energy Saving in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lecron Energy Saving and YiDong Electronics 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 YiDong Electronics Technology are associated (or correlated) with Lecron Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lecron Energy Saving has no effect on the direction of YiDong Electronics i.e., YiDong Electronics and Lecron Energy go up and down completely randomly.

Pair Corralation between YiDong Electronics and Lecron Energy

Assuming the 90 days trading horizon YiDong Electronics Technology is expected to generate 1.54 times more return on investment than Lecron Energy. However, YiDong Electronics is 1.54 times more volatile than Lecron Energy Saving. It trades about 0.14 of its potential returns per unit of risk. Lecron Energy Saving is currently generating about -0.5 per unit of risk. If you would invest  2,124  in YiDong Electronics Technology on October 10, 2024 and sell it today you would earn a total of  231.00  from holding YiDong Electronics Technology or generate 10.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

YiDong Electronics Technology  vs.  Lecron Energy Saving

 Performance 
       Timeline  
YiDong Electronics 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in YiDong Electronics Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YiDong Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.
Lecron Energy Saving 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lecron Energy Saving has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lecron Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

YiDong Electronics and Lecron Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with YiDong Electronics and Lecron Energy

The main advantage of trading using opposite YiDong Electronics and Lecron Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YiDong Electronics position performs unexpectedly, Lecron Energy 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 Lecron Energy will offset losses from the drop in Lecron Energy's long position.
The idea behind YiDong Electronics Technology and Lecron Energy Saving 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.
Check out your portfolio center.
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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