Correlation Between Huaxia Eye and Longshine Technology

Can any of the company-specific risk be diversified away by investing in both Huaxia Eye and Longshine Technology 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 Huaxia Eye and Longshine Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huaxia Eye Hospital and Longshine Technology Co, you can compare the effects of market volatilities on Huaxia Eye and Longshine Technology 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 Huaxia Eye with a short position of Longshine Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaxia Eye and Longshine Technology.

Diversification Opportunities for Huaxia Eye and Longshine Technology

0.64

Correlation Coefficient

Huaxia Eye  Longshine Technology

Poor diversification

The 3 months correlation between Huaxia and Longshine is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Huaxia Eye Hospital and Longshine Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longshine Technology and Huaxia Eye 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 Huaxia Eye Hospital are associated (or correlated) with Longshine Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longshine Technology has no effect on the direction of Huaxia Eye i.e., Huaxia Eye and Longshine Technology go up and down completely randomly.

Pair Corralation between Huaxia Eye and Longshine Technology

Assuming the 90 days trading horizon Huaxia Eye Hospital is expected to under-perform the Longshine Technology. But the stock apears to be less risky and, when comparing its historical volatility, Huaxia Eye Hospital is 1.19 times less risky than Longshine Technology. The stock trades about -0.05 of its potential returns per unit of risk. The Longshine Technology Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,654  in Longshine Technology Co on October 3, 2024 and sell it today you would lose (434.00) from holding Longshine Technology Co or give up 26.24% of portfolio value over 90 days.

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

Huaxia Eye Hospital  vs.  Longshine Technology Co

Huaxia Eye Hospital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaxia Eye Hospital 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.

Longshine Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Longshine Technology 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 Huaxia Eye and Longshine Technology

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

The idea behind Huaxia Eye Hospital and Longshine Technology 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.