Correlation Between Eastern Air and Loongson Technology

Can any of the company-specific risk be diversified away by investing in both Eastern Air and Loongson Technology 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 Eastern Air and Loongson Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eastern Air Logistics and Loongson Technology Corp, you can compare the effects of market volatilities on Eastern Air and Loongson Technology 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 Eastern Air with a short position of Loongson Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Air and Loongson Technology.

Diversification Opportunities for Eastern Air and Loongson Technology

-0.12

Correlation Coefficient

Eastern Air  Loongson Technology

Good diversification

The 3 months correlation between Eastern and Loongson is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Air Logistics and Loongson Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loongson Technology Corp and Eastern Air 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 Eastern Air Logistics are associated (or correlated) with Loongson Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loongson Technology Corp has no effect on the direction of Eastern Air i.e., Eastern Air and Loongson Technology go up and down completely randomly.

Pair Corralation between Eastern Air and Loongson Technology

Assuming the 90 days trading horizon Eastern Air Logistics is expected to under-perform the Loongson Technology. But the stock apears to be less risky and, when comparing its historical volatility, Eastern Air Logistics is 1.3 times less risky than Loongson Technology. The stock trades about -0.11 of its potential returns per unit of risk. The Loongson Technology Corp is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  14,790  in Loongson Technology Corp on December 26, 2024 and sell it today you would lose (2,196) from holding Loongson Technology Corp or give up 14.85% of portfolio value over 90 days.

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

Eastern Air Logistics  vs.  Loongson Technology Corp

Eastern Air Logistics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastern Air Logistics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Loongson Technology Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loongson Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Eastern Air and Loongson Technology

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

The idea behind Eastern Air Logistics and Loongson Technology Corp 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 Valuation module to check real value of public entities based on technical and fundamental data.