Correlation Between Lemtech Holdings and China Metal

Can any of the company-specific risk be diversified away by investing in both Lemtech Holdings and China Metal 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 Lemtech Holdings and China Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lemtech Holdings Co and China Metal Products, you can compare the effects of market volatilities on Lemtech Holdings and China Metal 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 Lemtech Holdings with a short position of China Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lemtech Holdings and China Metal.

Diversification Opportunities for Lemtech Holdings and China Metal

-0.83

Correlation Coefficient

Lemtech Holdings  China Metal

Pay attention - limited upside

The 3 months correlation between Lemtech and China is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lemtech Holdings Co and China Metal Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Metal Products and Lemtech Holdings 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 Lemtech Holdings Co are associated (or correlated) with China Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Metal Products has no effect on the direction of Lemtech Holdings i.e., Lemtech Holdings and China Metal go up and down completely randomly.

Pair Corralation between Lemtech Holdings and China Metal

Assuming the 90 days trading horizon Lemtech Holdings Co is expected to generate 4.62 times more return on investment than China Metal. However, Lemtech Holdings is 4.62 times more volatile than China Metal Products. It trades about 0.25 of its potential returns per unit of risk. China Metal Products is currently generating about -0.16 per unit of risk. If you would invest  12,500  in Lemtech Holdings Co on October 20, 2024 and sell it today you would earn a total of  3,400  from holding Lemtech Holdings Co or generate 27.2% return on investment over 90 days.

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

Lemtech Holdings Co  vs.  China Metal Products

Lemtech Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lemtech Holdings Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lemtech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

China Metal Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Metal Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lemtech Holdings and China Metal

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

The idea behind Lemtech Holdings Co and China Metal Products 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.