Correlation Between Lingyuan Iron and Duzhe Publishing

Can any of the company-specific risk be diversified away by investing in both Lingyuan Iron and Duzhe Publishing 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 Lingyuan Iron and Duzhe Publishing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lingyuan Iron Steel and Duzhe Publishing Media, you can compare the effects of market volatilities on Lingyuan Iron and Duzhe Publishing 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 Lingyuan Iron with a short position of Duzhe Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lingyuan Iron and Duzhe Publishing.

Diversification Opportunities for Lingyuan Iron and Duzhe Publishing

0.74

Correlation Coefficient

Lingyuan Iron  Duzhe Publishing

Poor diversification

The 3 months correlation between Lingyuan and Duzhe is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lingyuan Iron Steel and Duzhe Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duzhe Publishing Media and Lingyuan Iron 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 Lingyuan Iron Steel are associated (or correlated) with Duzhe Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duzhe Publishing Media has no effect on the direction of Lingyuan Iron i.e., Lingyuan Iron and Duzhe Publishing go up and down completely randomly.

Pair Corralation between Lingyuan Iron and Duzhe Publishing

Assuming the 90 days trading horizon Lingyuan Iron Steel is expected to under-perform the Duzhe Publishing. But the stock apears to be less risky and, when comparing its historical volatility, Lingyuan Iron Steel is 1.38 times less risky than Duzhe Publishing. The stock trades about -0.01 of its potential returns per unit of risk. The Duzhe Publishing Media is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  618.00  in Duzhe Publishing Media on December 2, 2024 and sell it today you would lose (10.00) from holding Duzhe Publishing Media or give up 1.62% of portfolio value over 90 days.

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

Lingyuan Iron Steel  vs.  Duzhe Publishing Media

Lingyuan Iron Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lingyuan Iron Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Duzhe Publishing Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Duzhe Publishing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Duzhe Publishing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lingyuan Iron and Duzhe Publishing

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

The idea behind Lingyuan Iron Steel and Duzhe Publishing Media 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.