Correlation Between Long Yuan and Suzhou Longway

Can any of the company-specific risk be diversified away by investing in both Long Yuan and Suzhou Longway 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 Suzhou Longway 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 Suzhou Longway Electronic, you can compare the effects of market volatilities on Long Yuan and Suzhou Longway 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 Suzhou Longway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Yuan and Suzhou Longway.

Diversification Opportunities for Long Yuan and Suzhou Longway

0.45

Correlation Coefficient

Long Yuan  Suzhou Longway

Very weak diversification

The 3 months correlation between Long and Suzhou is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Long Yuan Construction and Suzhou Longway Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Longway Electronic 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 Suzhou Longway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Longway Electronic has no effect on the direction of Long Yuan i.e., Long Yuan and Suzhou Longway go up and down completely randomly.

Pair Corralation between Long Yuan and Suzhou Longway

Assuming the 90 days trading horizon Long Yuan is expected to generate 3.9 times less return on investment than Suzhou Longway. But when comparing it to its historical volatility, Long Yuan Construction is 2.69 times less risky than Suzhou Longway. It trades about 0.06 of its potential returns per unit of risk. Suzhou Longway Electronic is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,760  in Suzhou Longway Electronic on December 25, 2024 and sell it today you would earn a total of  824.00  from holding Suzhou Longway Electronic or generate 21.91% return on investment over 90 days.

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

Long Yuan Construction  vs.  Suzhou Longway Electronic

Long Yuan Construction

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Long Yuan Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Long Yuan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Suzhou Longway Electronic

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Longway Electronic are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Longway sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Long Yuan and Suzhou Longway

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

The idea behind Long Yuan Construction and Suzhou Longway Electronic 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.