Correlation Between STL Technology and Lihtai Construction

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

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

Diversification Opportunities for STL Technology and Lihtai Construction

0.31

Correlation Coefficient

STL Technology  Lihtai Construction

Weak diversification

The 3 months correlation between STL and Lihtai is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding STL Technology Co and Lihtai Construction Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lihtai Construction and STL Technology 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 STL Technology Co 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 STL Technology i.e., STL Technology and Lihtai Construction go up and down completely randomly.

Pair Corralation between STL Technology and Lihtai Construction

Assuming the 90 days trading horizon STL Technology Co is expected to generate 14.62 times more return on investment than Lihtai Construction. However, STL Technology is 14.62 times more volatile than Lihtai Construction Enterprise. It trades about 0.18 of its potential returns per unit of risk. Lihtai Construction Enterprise is currently generating about 0.09 per unit of risk. If you would invest  5,230  in STL Technology Co on September 23, 2024 and sell it today you would earn a total of  1,140  from holding STL Technology Co or generate 21.8% return on investment over 90 days.

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

STL Technology Co  vs.  Lihtai Construction Enterprise

STL Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STL Technology Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, STL Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Lihtai Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lihtai Construction Enterprise are ranked lower than 2 (%) 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 STL Technology and Lihtai Construction

The main advantage of trading using opposite STL Technology and Lihtai Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STL Technology 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 STL Technology Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.