Correlation Between Linewell Software and Cangzhou Mingzhu

Can any of the company-specific risk be diversified away by investing in both Linewell Software and Cangzhou Mingzhu 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 Cangzhou Mingzhu 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 Cangzhou Mingzhu Plastic, you can compare the effects of market volatilities on Linewell Software and Cangzhou Mingzhu 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 Cangzhou Mingzhu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linewell Software and Cangzhou Mingzhu.

Diversification Opportunities for Linewell Software and Cangzhou Mingzhu

0.7

Correlation Coefficient

Linewell Software  Cangzhou Mingzhu

Poor diversification

The 3 months correlation between Linewell and Cangzhou is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Linewell Software Co and Cangzhou Mingzhu Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cangzhou Mingzhu Plastic 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 Cangzhou Mingzhu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cangzhou Mingzhu Plastic has no effect on the direction of Linewell Software i.e., Linewell Software and Cangzhou Mingzhu go up and down completely randomly.

Pair Corralation between Linewell Software and Cangzhou Mingzhu

Assuming the 90 days trading horizon Linewell Software Co is expected to generate 1.47 times more return on investment than Cangzhou Mingzhu. However, Linewell Software is 1.47 times more volatile than Cangzhou Mingzhu Plastic. It trades about -0.27 of its potential returns per unit of risk. Cangzhou Mingzhu Plastic is currently generating about -0.47 per unit of risk. If you would invest  1,178  in Linewell Software Co on October 8, 2024 and sell it today you would lose (143.00) from holding Linewell Software Co or give up 12.14% of portfolio value over 90 days.

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

Linewell Software Co  vs.  Cangzhou Mingzhu Plastic

Linewell Software

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cangzhou Mingzhu Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cangzhou Mingzhu Plastic 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.

Pair Trading with Linewell Software and Cangzhou Mingzhu

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

The idea behind Linewell Software Co and Cangzhou Mingzhu Plastic 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.