Correlation Between Heilongjiang Transport and Loctek Ergonomic

Can any of the company-specific risk be diversified away by investing in both Heilongjiang Transport and Loctek Ergonomic 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 Heilongjiang Transport and Loctek Ergonomic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heilongjiang Transport Development and Loctek Ergonomic Technology, you can compare the effects of market volatilities on Heilongjiang Transport and Loctek Ergonomic 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 Heilongjiang Transport with a short position of Loctek Ergonomic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heilongjiang Transport and Loctek Ergonomic.

Diversification Opportunities for Heilongjiang Transport and Loctek Ergonomic

0.67

Correlation Coefficient

Heilongjiang Transport  Loctek Ergonomic

Poor diversification

The 3 months correlation between Heilongjiang and Loctek is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Loctek Ergonomic Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loctek Ergonomic Tec and Heilongjiang Transport 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 Heilongjiang Transport Development are associated (or correlated) with Loctek Ergonomic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loctek Ergonomic Tec has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Loctek Ergonomic go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Loctek Ergonomic

Assuming the 90 days trading horizon Heilongjiang Transport Development is expected to generate 0.88 times more return on investment than Loctek Ergonomic. However, Heilongjiang Transport Development is 1.14 times less risky than Loctek Ergonomic. It trades about -0.01 of its potential returns per unit of risk. Loctek Ergonomic Technology is currently generating about -0.08 per unit of risk. If you would invest  371.00  in Heilongjiang Transport Development on October 5, 2024 and sell it today you would lose (15.00) from holding Heilongjiang Transport Development or give up 4.04% of portfolio value over 90 days.

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

Heilongjiang Transport Develop  vs.  Loctek Ergonomic Technology

Heilongjiang Transport

Risk-Adjusted Performance

0 of 100

Very Weak

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

Loctek Ergonomic Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loctek Ergonomic Technology 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Heilongjiang Transport and Loctek Ergonomic

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

The idea behind Heilongjiang Transport Development and Loctek Ergonomic 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.