Correlation Between China State and Lonkey Industrial

Can any of the company-specific risk be diversified away by investing in both China State and Lonkey Industrial 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 China State and Lonkey Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China State Construction and Lonkey Industrial Co, you can compare the effects of market volatilities on China State and Lonkey Industrial 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 China State with a short position of Lonkey Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China State and Lonkey Industrial.

Diversification Opportunities for China State and Lonkey Industrial

0.34

Correlation Coefficient

China State  Lonkey Industrial

Weak diversification

The 3 months correlation between China and Lonkey is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction and Lonkey Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonkey Industrial and China State 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 China State Construction are associated (or correlated) with Lonkey Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonkey Industrial has no effect on the direction of China State i.e., China State and Lonkey Industrial go up and down completely randomly.

Pair Corralation between China State and Lonkey Industrial

Assuming the 90 days trading horizon China State Construction is expected to generate 0.81 times more return on investment than Lonkey Industrial. However, China State Construction is 1.23 times less risky than Lonkey Industrial. It trades about 0.02 of its potential returns per unit of risk. Lonkey Industrial Co is currently generating about 0.01 per unit of risk. If you would invest  531.00  in China State Construction on October 22, 2024 and sell it today you would earn a total of  30.00  from holding China State Construction or generate 5.65% return on investment over 90 days.

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

China State Construction  vs.  Lonkey Industrial Co

China State Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China State Construction 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.

Lonkey Industrial

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with China State and Lonkey Industrial

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

The idea behind China State Construction and Lonkey Industrial 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.