Correlation Between Fuda Alloy and Loctek Ergonomic

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

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

Diversification Opportunities for Fuda Alloy and Loctek Ergonomic

0.61

Correlation Coefficient

Fuda Alloy  Loctek Ergonomic

Poor diversification

The 3 months correlation between Fuda and Loctek is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fuda Alloy Materials 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 Fuda Alloy 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 Fuda Alloy Materials 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 Fuda Alloy i.e., Fuda Alloy and Loctek Ergonomic go up and down completely randomly.

Pair Corralation between Fuda Alloy and Loctek Ergonomic

Assuming the 90 days trading horizon Fuda Alloy is expected to generate 8.26 times less return on investment than Loctek Ergonomic. But when comparing it to its historical volatility, Fuda Alloy Materials is 1.13 times less risky than Loctek Ergonomic. It trades about 0.0 of its potential returns per unit of risk. Loctek Ergonomic Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,245  in Loctek Ergonomic Technology on October 5, 2024 and sell it today you would earn a total of  285.00  from holding Loctek Ergonomic Technology or generate 22.89% return on investment over 90 days.

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

Fuda Alloy Materials  vs.  Loctek Ergonomic Technology

Fuda Alloy Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fuda Alloy Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fuda Alloy 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 Fuda Alloy and Loctek Ergonomic

The main advantage of trading using opposite Fuda Alloy and Loctek Ergonomic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuda Alloy 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 Fuda Alloy Materials 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.