Correlation Between Lungyen Life and Dadi Early

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

Diversification Opportunities for Lungyen Life and Dadi Early

0.1

Correlation Coefficient

Lungyen Life  Dadi Early

Average diversification

The 3 months correlation between Lungyen and Dadi is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lungyen Life Service and Dadi Early Childhood Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dadi Early Childhood 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 Dadi Early. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dadi Early Childhood has no effect on the direction of Lungyen Life i.e., Lungyen Life and Dadi Early go up and down completely randomly.

Pair Corralation between Lungyen Life and Dadi Early

Assuming the 90 days trading horizon Lungyen Life Service is expected to generate 1.15 times more return on investment than Dadi Early. However, Lungyen Life is 1.15 times more volatile than Dadi Early Childhood Education. It trades about 0.2 of its potential returns per unit of risk. Dadi Early Childhood Education is currently generating about 0.15 per unit of risk. If you would invest  5,600  in Lungyen Life Service on December 28, 2024 and sell it today you would earn a total of  2,030  from holding Lungyen Life Service or generate 36.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Lungyen Life Service  vs.  Dadi Early Childhood Education

Lungyen Life Service

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lungyen Life Service are ranked lower than 15 (%) 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.

Dadi Early Childhood

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dadi Early Childhood Education are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dadi Early showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lungyen Life and Dadi Early

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

The idea behind Lungyen Life Service and Dadi Early Childhood Education 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.