Correlation Between LongDa Construction and United Integrated

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

By analyzing existing cross correlation between LongDa Construction Development and United Integrated Services, you can compare the effects of market volatilities on LongDa Construction and United Integrated 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 LongDa Construction with a short position of United Integrated. Check out your portfolio center. Please also check ongoing floating volatility patterns of LongDa Construction and United Integrated.

Diversification Opportunities for LongDa Construction and United Integrated

-0.81

Correlation Coefficient

LongDa Construction  United Integrated

Pay attention - limited upside

The 3 months correlation between LongDa and United is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding LongDa Construction Developmen and United Integrated Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Integrated and LongDa Construction 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 LongDa Construction Development are associated (or correlated) with United Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Integrated has no effect on the direction of LongDa Construction i.e., LongDa Construction and United Integrated go up and down completely randomly.

Pair Corralation between LongDa Construction and United Integrated

Assuming the 90 days trading horizon LongDa Construction Development is expected to generate 0.64 times more return on investment than United Integrated. However, LongDa Construction Development is 1.55 times less risky than United Integrated. It trades about 0.13 of its potential returns per unit of risk. United Integrated Services is currently generating about -0.02 per unit of risk. If you would invest  3,390  in LongDa Construction Development on December 22, 2024 and sell it today you would earn a total of  410.00  from holding LongDa Construction Development or generate 12.09% return on investment over 90 days.

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

LongDa Construction Developmen  vs.  United Integrated Services

LongDa Construction

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LongDa Construction Development are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LongDa Construction showed solid returns over the last few months and may actually be approaching a breakup point.

United Integrated

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Integrated Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, United Integrated 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 LongDa Construction and United Integrated

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

The idea behind LongDa Construction Development and United Integrated Services 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.