Correlation Between Long Yuan and Jointo Energy

Can any of the company-specific risk be diversified away by investing in both Long Yuan and Jointo Energy 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 Long Yuan and Jointo Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Long Yuan Construction and Jointo Energy Investment, you can compare the effects of market volatilities on Long Yuan and Jointo Energy 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 Long Yuan with a short position of Jointo Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Yuan and Jointo Energy.

Diversification Opportunities for Long Yuan and Jointo Energy

0.28

Correlation Coefficient

Long Yuan  Jointo Energy

Modest diversification

The 3 months correlation between Long and Jointo is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Long Yuan Construction and Jointo Energy Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jointo Energy Investment and Long Yuan 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 Long Yuan Construction are associated (or correlated) with Jointo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jointo Energy Investment has no effect on the direction of Long Yuan i.e., Long Yuan and Jointo Energy go up and down completely randomly.

Pair Corralation between Long Yuan and Jointo Energy

Assuming the 90 days trading horizon Long Yuan Construction is expected to generate 1.29 times more return on investment than Jointo Energy. However, Long Yuan is 1.29 times more volatile than Jointo Energy Investment. It trades about 0.03 of its potential returns per unit of risk. Jointo Energy Investment is currently generating about -0.03 per unit of risk. If you would invest  338.00  in Long Yuan Construction on October 8, 2024 and sell it today you would earn a total of  7.00  from holding Long Yuan Construction or generate 2.07% return on investment over 90 days.

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

Long Yuan Construction  vs.  Jointo Energy Investment

Long Yuan Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Long Yuan Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Long Yuan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jointo Energy Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Long Yuan and Jointo Energy

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

The idea behind Long Yuan Construction and Jointo Energy Investment 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.