Correlation Between Linewell Software and Luolai Home

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

Diversification Opportunities for Linewell Software and Luolai Home

0.53

Correlation Coefficient

Linewell Software  Luolai Home

Very weak diversification

The 3 months correlation between Linewell and Luolai is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Linewell Software Co and Luolai Home Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luolai Home Textile 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 Luolai Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luolai Home Textile has no effect on the direction of Linewell Software i.e., Linewell Software and Luolai Home go up and down completely randomly.

Pair Corralation between Linewell Software and Luolai Home

Assuming the 90 days trading horizon Linewell Software Co is expected to under-perform the Luolai Home. But the stock apears to be less risky and, when comparing its historical volatility, Linewell Software Co is 1.04 times less risky than Luolai Home. The stock trades about -0.31 of its potential returns per unit of risk. The Luolai Home Textile is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  845.00  in Luolai Home Textile on October 11, 2024 and sell it today you would lose (3.00) from holding Luolai Home Textile or give up 0.36% of portfolio value over 90 days.

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

Linewell Software Co  vs.  Luolai Home Textile

Linewell Software

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Linewell Software Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linewell Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Luolai Home Textile

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Luolai Home Textile are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Luolai Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Linewell Software and Luolai Home

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

The idea behind Linewell Software Co and Luolai Home Textile 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.