Correlation Between Bright Led and Lihtai Construction

Can any of the company-specific risk be diversified away by investing in both Bright Led and Lihtai Construction 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 Bright Led and Lihtai Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bright Led Electronics and Lihtai Construction Enterprise, you can compare the effects of market volatilities on Bright Led and Lihtai Construction 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 Bright Led with a short position of Lihtai Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Led and Lihtai Construction.

Diversification Opportunities for Bright Led and Lihtai Construction

-0.36

Correlation Coefficient

Bright Led  Lihtai Construction

Very good diversification

The 3 months correlation between Bright and Lihtai is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bright Led Electronics and Lihtai Construction Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lihtai Construction and Bright Led 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 Bright Led Electronics are associated (or correlated) with Lihtai Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lihtai Construction has no effect on the direction of Bright Led i.e., Bright Led and Lihtai Construction go up and down completely randomly.

Pair Corralation between Bright Led and Lihtai Construction

Assuming the 90 days trading horizon Bright Led Electronics is expected to under-perform the Lihtai Construction. In addition to that, Bright Led is 3.79 times more volatile than Lihtai Construction Enterprise. It trades about -0.01 of its total potential returns per unit of risk. Lihtai Construction Enterprise is currently generating about 0.0 per unit of volatility. If you would invest  8,290  in Lihtai Construction Enterprise on September 26, 2024 and sell it today you would lose (60.00) from holding Lihtai Construction Enterprise or give up 0.72% of portfolio value over 90 days.

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

Bright Led Electronics  vs.  Lihtai Construction Enterprise

Bright Led Electronics

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Led Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Bright Led is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lihtai Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lihtai Construction Enterprise are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lihtai Construction is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bright Led and Lihtai Construction

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

The idea behind Bright Led Electronics and Lihtai Construction Enterprise 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 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.