Correlation Between Changjiang Jinggong and Leyard Optoelectronic

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Can any of the company-specific risk be diversified away by investing in both Changjiang Jinggong and Leyard Optoelectronic 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 Changjiang Jinggong and Leyard Optoelectronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Changjiang Jinggong Steel and Leyard Optoelectronic, you can compare the effects of market volatilities on Changjiang Jinggong and Leyard Optoelectronic 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 Changjiang Jinggong with a short position of Leyard Optoelectronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changjiang Jinggong and Leyard Optoelectronic.

Diversification Opportunities for Changjiang Jinggong and Leyard Optoelectronic

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Changjiang and Leyard is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Changjiang Jinggong Steel and Leyard Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leyard Optoelectronic and Changjiang Jinggong 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 Changjiang Jinggong Steel are associated (or correlated) with Leyard Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leyard Optoelectronic has no effect on the direction of Changjiang Jinggong i.e., Changjiang Jinggong and Leyard Optoelectronic go up and down completely randomly.

Pair Corralation between Changjiang Jinggong and Leyard Optoelectronic

Assuming the 90 days trading horizon Changjiang Jinggong Steel is expected to generate 0.38 times more return on investment than Leyard Optoelectronic. However, Changjiang Jinggong Steel is 2.65 times less risky than Leyard Optoelectronic. It trades about -0.16 of its potential returns per unit of risk. Leyard Optoelectronic is currently generating about -0.18 per unit of risk. If you would invest  302.00  in Changjiang Jinggong Steel on October 22, 2024 and sell it today you would lose (15.00) from holding Changjiang Jinggong Steel or give up 4.97% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

Changjiang Jinggong Steel  vs.  Leyard Optoelectronic

 Performance 
       Timeline  
Changjiang Jinggong Steel 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Changjiang Jinggong Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Changjiang Jinggong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Leyard Optoelectronic 

Risk-Adjusted Performance

6 of 100

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

Changjiang Jinggong and Leyard Optoelectronic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Changjiang Jinggong and Leyard Optoelectronic

The main advantage of trading using opposite Changjiang Jinggong and Leyard Optoelectronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Changjiang Jinggong position performs unexpectedly, Leyard Optoelectronic 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 Leyard Optoelectronic will offset losses from the drop in Leyard Optoelectronic's long position.
The idea behind Changjiang Jinggong Steel and Leyard Optoelectronic 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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