Correlation Between China Molybdenum and Longmaster Information

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

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

Diversification Opportunities for China Molybdenum and Longmaster Information

0.16

Correlation Coefficient

China Molybdenum  Longmaster Information

Average diversification

The 3 months correlation between China and Longmaster is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding China Molybdenum Co and Longmaster Information Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longmaster Information and China Molybdenum 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 China Molybdenum Co are associated (or correlated) with Longmaster Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longmaster Information has no effect on the direction of China Molybdenum i.e., China Molybdenum and Longmaster Information go up and down completely randomly.

Pair Corralation between China Molybdenum and Longmaster Information

Assuming the 90 days trading horizon China Molybdenum Co is expected to generate 0.53 times more return on investment than Longmaster Information. However, China Molybdenum Co is 1.9 times less risky than Longmaster Information. It trades about 0.14 of its potential returns per unit of risk. Longmaster Information Tech is currently generating about 0.0 per unit of risk. If you would invest  695.00  in China Molybdenum Co on December 26, 2024 and sell it today you would earn a total of  113.00  from holding China Molybdenum Co or generate 16.26% return on investment over 90 days.

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

China Molybdenum Co  vs.  Longmaster Information Tech

China Molybdenum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Molybdenum Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Molybdenum sustained solid returns over the last few months and may actually be approaching a breakup point.

Longmaster Information

Risk-Adjusted Performance

Very Weak

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

Pair Trading with China Molybdenum and Longmaster Information

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

The idea behind China Molybdenum Co and Longmaster Information Tech 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.