Correlation Between Dalian Thermal and Lootom Telcovideo

Can any of the company-specific risk be diversified away by investing in both Dalian Thermal and Lootom Telcovideo 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 Dalian Thermal and Lootom Telcovideo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dalian Thermal Power and Lootom Telcovideo Network, you can compare the effects of market volatilities on Dalian Thermal and Lootom Telcovideo 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 Dalian Thermal with a short position of Lootom Telcovideo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalian Thermal and Lootom Telcovideo.

Diversification Opportunities for Dalian Thermal and Lootom Telcovideo

0.86

Correlation Coefficient

Dalian Thermal  Lootom Telcovideo

Very poor diversification

The 3 months correlation between Dalian and Lootom is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dalian Thermal Power and Lootom Telcovideo Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lootom Telcovideo Network and Dalian Thermal 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 Dalian Thermal Power are associated (or correlated) with Lootom Telcovideo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lootom Telcovideo Network has no effect on the direction of Dalian Thermal i.e., Dalian Thermal and Lootom Telcovideo go up and down completely randomly.

Pair Corralation between Dalian Thermal and Lootom Telcovideo

Assuming the 90 days trading horizon Dalian Thermal is expected to generate 2.2 times less return on investment than Lootom Telcovideo. But when comparing it to its historical volatility, Dalian Thermal Power is 1.19 times less risky than Lootom Telcovideo. It trades about 0.2 of its potential returns per unit of risk. Lootom Telcovideo Network is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  718.00  in Lootom Telcovideo Network on September 17, 2024 and sell it today you would earn a total of  233.00  from holding Lootom Telcovideo Network or generate 32.45% return on investment over 90 days.

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

Dalian Thermal Power  vs.  Lootom Telcovideo Network

Dalian Thermal Power

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Thermal Power are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dalian Thermal sustained solid returns over the last few months and may actually be approaching a breakup point.

Lootom Telcovideo Network

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lootom Telcovideo Network are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lootom Telcovideo sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dalian Thermal and Lootom Telcovideo

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

The idea behind Dalian Thermal Power and Lootom Telcovideo Network 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.

Check out your portfolio center.

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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.