Correlation Between AUPU Home and Liuzhou Chemical

Can any of the company-specific risk be diversified away by investing in both AUPU Home and Liuzhou Chemical 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 AUPU Home and Liuzhou Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AUPU Home Style and Liuzhou Chemical Industry, you can compare the effects of market volatilities on AUPU Home and Liuzhou Chemical 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 AUPU Home with a short position of Liuzhou Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUPU Home and Liuzhou Chemical.

Diversification Opportunities for AUPU Home and Liuzhou Chemical

0.08

Correlation Coefficient

AUPU Home  Liuzhou Chemical

Significant diversification

The 3 months correlation between AUPU and Liuzhou is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding AUPU Home Style and Liuzhou Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liuzhou Chemical Industry and AUPU Home 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 AUPU Home Style are associated (or correlated) with Liuzhou Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liuzhou Chemical Industry has no effect on the direction of AUPU Home i.e., AUPU Home and Liuzhou Chemical go up and down completely randomly.

Pair Corralation between AUPU Home and Liuzhou Chemical

Assuming the 90 days trading horizon AUPU Home Style is expected to under-perform the Liuzhou Chemical. But the stock apears to be less risky and, when comparing its historical volatility, AUPU Home Style is 2.59 times less risky than Liuzhou Chemical. The stock trades about -0.03 of its potential returns per unit of risk. The Liuzhou Chemical Industry is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  297.00  in Liuzhou Chemical Industry on December 24, 2024 and sell it today you would earn a total of  33.00  from holding Liuzhou Chemical Industry or generate 11.11% return on investment over 90 days.

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

AUPU Home Style  vs.  Liuzhou Chemical Industry

AUPU Home Style

Risk-Adjusted Performance

Very Weak

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

Liuzhou Chemical Industry

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liuzhou Chemical Industry are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liuzhou Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AUPU Home and Liuzhou Chemical

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

The idea behind AUPU Home Style and Liuzhou Chemical Industry 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.