Correlation Between Fiberhome Telecommunicatio and LianChuang Electronic

Can any of the company-specific risk be diversified away by investing in both Fiberhome Telecommunicatio and LianChuang Electronic 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 Fiberhome Telecommunicatio and LianChuang Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fiberhome Telecommunication Technologies and LianChuang Electronic Technology, you can compare the effects of market volatilities on Fiberhome Telecommunicatio and LianChuang Electronic 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 Fiberhome Telecommunicatio with a short position of LianChuang Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fiberhome Telecommunicatio and LianChuang Electronic.

Diversification Opportunities for Fiberhome Telecommunicatio and LianChuang Electronic

0.91

Correlation Coefficient

Fiberhome Telecommunicatio  LianChuang Electronic

Almost no diversification

The 3 months correlation between Fiberhome and LianChuang is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Fiberhome Telecommunication Te and LianChuang Electronic Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LianChuang Electronic and Fiberhome Telecommunicatio 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 Fiberhome Telecommunication Technologies are associated (or correlated) with LianChuang Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LianChuang Electronic has no effect on the direction of Fiberhome Telecommunicatio i.e., Fiberhome Telecommunicatio and LianChuang Electronic go up and down completely randomly.

Pair Corralation between Fiberhome Telecommunicatio and LianChuang Electronic

Assuming the 90 days trading horizon Fiberhome Telecommunicatio is expected to generate 1.73 times less return on investment than LianChuang Electronic. But when comparing it to its historical volatility, Fiberhome Telecommunication Technologies is 1.58 times less risky than LianChuang Electronic. It trades about 0.18 of its potential returns per unit of risk. LianChuang Electronic Technology is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  682.00  in LianChuang Electronic Technology on September 13, 2024 and sell it today you would earn a total of  410.00  from holding LianChuang Electronic Technology or generate 60.12% return on investment over 90 days.

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

Fiberhome Telecommunication Te  vs.  LianChuang Electronic Technolo

Fiberhome Telecommunicatio

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberhome Telecommunication Technologies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fiberhome Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.

LianChuang Electronic

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LianChuang Electronic Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LianChuang Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fiberhome Telecommunicatio and LianChuang Electronic

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

The idea behind Fiberhome Telecommunication Technologies and LianChuang Electronic Technology 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.