Correlation Between Dongxing Sec and Longshine Technology

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

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

Diversification Opportunities for Dongxing Sec and Longshine Technology

0.85

Correlation Coefficient

Dongxing Sec  Longshine Technology

Very poor diversification

The 3 months correlation between Dongxing and Longshine is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dongxing Sec Co and Longshine Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longshine Technology and Dongxing Sec 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 Dongxing Sec Co are associated (or correlated) with Longshine Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longshine Technology has no effect on the direction of Dongxing Sec i.e., Dongxing Sec and Longshine Technology go up and down completely randomly.

Pair Corralation between Dongxing Sec and Longshine Technology

Assuming the 90 days trading horizon Dongxing Sec is expected to generate 2.12 times less return on investment than Longshine Technology. But when comparing it to its historical volatility, Dongxing Sec Co is 1.3 times less risky than Longshine Technology. It trades about 0.02 of its potential returns per unit of risk. Longshine Technology Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,274  in Longshine Technology Co on December 27, 2024 and sell it today you would earn a total of  23.00  from holding Longshine Technology Co or generate 1.81% return on investment over 90 days.

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

Dongxing Sec Co  vs.  Longshine Technology Co

Dongxing Sec

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongxing Sec Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongxing Sec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Longshine Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Longshine Technology Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Longshine Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dongxing Sec and Longshine Technology

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

The idea behind Dongxing Sec Co and Longshine Technology Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.