Correlation Between Luyin Investment and Sinomach General

Can any of the company-specific risk be diversified away by investing in both Luyin Investment and Sinomach General 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 Luyin Investment and Sinomach General into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Luyin Investment Group and Sinomach General Machinery, you can compare the effects of market volatilities on Luyin Investment and Sinomach General 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 Luyin Investment with a short position of Sinomach General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luyin Investment and Sinomach General.

Diversification Opportunities for Luyin Investment and Sinomach General

0.78

Correlation Coefficient

Luyin Investment  Sinomach General

Poor diversification

The 3 months correlation between Luyin and Sinomach is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Luyin Investment Group and Sinomach General Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomach General Mac and Luyin Investment 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 Luyin Investment Group are associated (or correlated) with Sinomach General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomach General Mac has no effect on the direction of Luyin Investment i.e., Luyin Investment and Sinomach General go up and down completely randomly.

Pair Corralation between Luyin Investment and Sinomach General

Assuming the 90 days trading horizon Luyin Investment is expected to generate 2.28 times less return on investment than Sinomach General. In addition to that, Luyin Investment is 1.29 times more volatile than Sinomach General Machinery. It trades about 0.02 of its total potential returns per unit of risk. Sinomach General Machinery is currently generating about 0.04 per unit of volatility. If you would invest  1,495  in Sinomach General Machinery on October 26, 2024 and sell it today you would earn a total of  24.00  from holding Sinomach General Machinery or generate 1.61% return on investment over 90 days.

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

Luyin Investment Group  vs.  Sinomach General Machinery

Luyin Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sinomach General Mac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinomach General Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Luyin Investment and Sinomach General

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

The idea behind Luyin Investment Group and Sinomach General Machinery 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.