Correlation Between Lungyen Life and Sunfon Construction

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

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

Diversification Opportunities for Lungyen Life and Sunfon Construction

-0.78

Correlation Coefficient

Lungyen Life  Sunfon Construction

Pay attention - limited upside

The 3 months correlation between Lungyen and Sunfon is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lungyen Life Service and Sunfon Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunfon Construction and Lungyen Life 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 Lungyen Life Service are associated (or correlated) with Sunfon Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunfon Construction has no effect on the direction of Lungyen Life i.e., Lungyen Life and Sunfon Construction go up and down completely randomly.

Pair Corralation between Lungyen Life and Sunfon Construction

Assuming the 90 days trading horizon Lungyen Life Service is expected to generate 2.04 times more return on investment than Sunfon Construction. However, Lungyen Life is 2.04 times more volatile than Sunfon Construction Co. It trades about 0.21 of its potential returns per unit of risk. Sunfon Construction Co is currently generating about -0.15 per unit of risk. If you would invest  4,700  in Lungyen Life Service on September 25, 2024 and sell it today you would earn a total of  800.00  from holding Lungyen Life Service or generate 17.02% return on investment over 90 days.

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

Lungyen Life Service  vs.  Sunfon Construction Co

Lungyen Life Service

Risk-Adjusted Performance

10 of 100

OK

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

Sunfon Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunfon Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Lungyen Life and Sunfon Construction

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

The idea behind Lungyen Life Service and Sunfon Construction 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.