Correlation Between Cinda Securities and LianChuang Electronic

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

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

Diversification Opportunities for Cinda Securities and LianChuang Electronic

0.65

Correlation Coefficient

Cinda Securities  LianChuang Electronic

Poor diversification

The 3 months correlation between Cinda and LianChuang is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cinda Securities Co and LianChuang Electronic Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LianChuang Electronic and Cinda Securities 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 Cinda Securities Co 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 Cinda Securities i.e., Cinda Securities and LianChuang Electronic go up and down completely randomly.

Pair Corralation between Cinda Securities and LianChuang Electronic

Assuming the 90 days trading horizon Cinda Securities is expected to generate 3.23 times less return on investment than LianChuang Electronic. But when comparing it to its historical volatility, Cinda Securities Co is 1.37 times less risky than LianChuang Electronic. It trades about 0.03 of its potential returns per unit of risk. LianChuang Electronic Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  992.00  in LianChuang Electronic Technology on December 27, 2024 and sell it today you would earn a total of  150.00  from holding LianChuang Electronic Technology or generate 15.12% return on investment over 90 days.

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

Cinda Securities Co  vs.  LianChuang Electronic Technolo

Cinda Securities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cinda Securities Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cinda Securities may actually be approaching a critical reversion point that can send shares even higher in April 2025.

LianChuang Electronic

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LianChuang Electronic Technology are ranked lower than 6 (%) 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 Cinda Securities and LianChuang Electronic

The main advantage of trading using opposite Cinda Securities and LianChuang Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cinda Securities 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 Cinda Securities Co 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.