Correlation Between Longjian Road and Shenzhen Topway

Can any of the company-specific risk be diversified away by investing in both Longjian Road and Shenzhen Topway 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 Longjian Road and Shenzhen Topway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Longjian Road Bridge and Shenzhen Topway Video, you can compare the effects of market volatilities on Longjian Road and Shenzhen Topway 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 Longjian Road with a short position of Shenzhen Topway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longjian Road and Shenzhen Topway.

Diversification Opportunities for Longjian Road and Shenzhen Topway

0.44

Correlation Coefficient

Longjian Road  Shenzhen Topway

Very weak diversification

The 3 months correlation between Longjian and Shenzhen is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Longjian Road Bridge and Shenzhen Topway Video in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Topway Video and Longjian Road 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 Longjian Road Bridge are associated (or correlated) with Shenzhen Topway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Topway Video has no effect on the direction of Longjian Road i.e., Longjian Road and Shenzhen Topway go up and down completely randomly.

Pair Corralation between Longjian Road and Shenzhen Topway

Assuming the 90 days trading horizon Longjian Road Bridge is expected to under-perform the Shenzhen Topway. But the stock apears to be less risky and, when comparing its historical volatility, Longjian Road Bridge is 1.87 times less risky than Shenzhen Topway. The stock trades about -0.06 of its potential returns per unit of risk. The Shenzhen Topway Video is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  835.00  in Shenzhen Topway Video on December 26, 2024 and sell it today you would earn a total of  66.00  from holding Shenzhen Topway Video or generate 7.9% return on investment over 90 days.

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

Longjian Road Bridge  vs.  Shenzhen Topway Video

Longjian Road Bridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Longjian Road Bridge 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.

Shenzhen Topway Video

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Longjian Road and Shenzhen Topway

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

The idea behind Longjian Road Bridge and Shenzhen Topway Video 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.