Correlation Between Duzhe Publishing and Luolai Home

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

By analyzing existing cross correlation between Duzhe Publishing Media and Luolai Home Textile, you can compare the effects of market volatilities on Duzhe Publishing 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 Duzhe Publishing with a short position of Luolai Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duzhe Publishing and Luolai Home.

Diversification Opportunities for Duzhe Publishing and Luolai Home

0.89

Correlation Coefficient

Duzhe Publishing  Luolai Home

Very poor diversification

The 3 months correlation between Duzhe and Luolai is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Duzhe Publishing Media 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 Duzhe Publishing 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 Duzhe Publishing Media 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 Duzhe Publishing i.e., Duzhe Publishing and Luolai Home go up and down completely randomly.

Pair Corralation between Duzhe Publishing and Luolai Home

Assuming the 90 days trading horizon Duzhe Publishing Media is expected to generate 1.52 times more return on investment than Luolai Home. However, Duzhe Publishing is 1.52 times more volatile than Luolai Home Textile. It trades about 0.25 of its potential returns per unit of risk. Luolai Home Textile is currently generating about 0.09 per unit of risk. If you would invest  575.00  in Duzhe Publishing Media on September 19, 2024 and sell it today you would earn a total of  133.00  from holding Duzhe Publishing Media or generate 23.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Duzhe Publishing Media  vs.  Luolai Home Textile

Duzhe Publishing Media

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Duzhe Publishing Media are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Duzhe Publishing sustained solid returns over the last few months and may actually be approaching a breakup point.

Luolai Home Textile

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luolai Home Textile are ranked lower than 14 (%) 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 Duzhe Publishing and Luolai Home

The main advantage of trading using opposite Duzhe Publishing and Luolai Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duzhe Publishing 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 Duzhe Publishing Media 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.