Correlation Between LongDa Construction and Farglory Life

Can any of the company-specific risk be diversified away by investing in both LongDa Construction and Farglory Life 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 Farglory Life 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 Farglory Life Insurance, you can compare the effects of market volatilities on LongDa Construction and Farglory Life 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 Farglory Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of LongDa Construction and Farglory Life.

Diversification Opportunities for LongDa Construction and Farglory Life

0.77

Correlation Coefficient

LongDa Construction  Farglory Life

Poor diversification

The 3 months correlation between LongDa and Farglory is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding LongDa Construction Developmen and Farglory Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farglory Life Insurance 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 Farglory Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farglory Life Insurance has no effect on the direction of LongDa Construction i.e., LongDa Construction and Farglory Life go up and down completely randomly.

Pair Corralation between LongDa Construction and Farglory Life

Assuming the 90 days trading horizon LongDa Construction Development is expected to generate 1.18 times more return on investment than Farglory Life. However, LongDa Construction is 1.18 times more volatile than Farglory Life Insurance. It trades about 0.14 of its potential returns per unit of risk. Farglory Life Insurance is currently generating about 0.07 per unit of risk. If you would invest  3,370  in LongDa Construction Development on December 24, 2024 and sell it today you would earn a total of  430.00  from holding LongDa Construction Development or generate 12.76% return on investment over 90 days.

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

LongDa Construction Developmen  vs.  Farglory Life Insurance

LongDa Construction

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LongDa Construction Development are ranked lower than 11 (%) 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.

Farglory Life Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farglory Life Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Farglory Life 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 Farglory Life

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

The idea behind LongDa Construction Development and Farglory Life Insurance 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.