Correlation Between Lihtai Construction and Sunfun Info

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

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

Diversification Opportunities for Lihtai Construction and Sunfun Info

-0.06

Correlation Coefficient

Lihtai Construction  Sunfun Info

Good diversification

The 3 months correlation between Lihtai and Sunfun is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lihtai Construction Enterprise and Sunfun Info Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunfun Info and Lihtai 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 Lihtai Construction Enterprise are associated (or correlated) with Sunfun Info. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunfun Info has no effect on the direction of Lihtai Construction i.e., Lihtai Construction and Sunfun Info go up and down completely randomly.

Pair Corralation between Lihtai Construction and Sunfun Info

Assuming the 90 days trading horizon Lihtai Construction is expected to generate 36.87 times less return on investment than Sunfun Info. But when comparing it to its historical volatility, Lihtai Construction Enterprise is 16.92 times less risky than Sunfun Info. It trades about 0.04 of its potential returns per unit of risk. Sunfun Info Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,492  in Sunfun Info Co on October 9, 2024 and sell it today you would earn a total of  213.00  from holding Sunfun Info Co or generate 6.1% return on investment over 90 days.

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

Lihtai Construction Enterprise  vs.  Sunfun Info Co

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.

Sunfun Info

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunfun Info Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sunfun Info showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lihtai Construction and Sunfun Info

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

The idea behind Lihtai Construction Enterprise and Sunfun Info Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .