Correlation Between Linewell Software and China Vanke

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

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

Diversification Opportunities for Linewell Software and China Vanke

0.58

Correlation Coefficient

Linewell Software  China Vanke

Very weak diversification

The 3 months correlation between Linewell and China is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Linewell Software Co and China Vanke Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Vanke and Linewell Software 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 Linewell Software Co are associated (or correlated) with China Vanke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Vanke has no effect on the direction of Linewell Software i.e., Linewell Software and China Vanke go up and down completely randomly.

Pair Corralation between Linewell Software and China Vanke

Assuming the 90 days trading horizon Linewell Software Co is expected to generate 1.44 times more return on investment than China Vanke. However, Linewell Software is 1.44 times more volatile than China Vanke Co. It trades about 0.1 of its potential returns per unit of risk. China Vanke Co is currently generating about -0.01 per unit of risk. If you would invest  1,097  in Linewell Software Co on December 30, 2024 and sell it today you would earn a total of  206.00  from holding Linewell Software Co or generate 18.78% return on investment over 90 days.

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

Linewell Software Co  vs.  China Vanke Co

Linewell Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linewell Software Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linewell Software sustained solid returns over the last few months and may actually be approaching a breakup point.

China Vanke

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Linewell Software and China Vanke

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

The idea behind Linewell Software Co and China Vanke 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.