Correlation Between Lutian Machinery and Shenzhen RoadRover

Can any of the company-specific risk be diversified away by investing in both Lutian Machinery and Shenzhen RoadRover 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 Lutian Machinery and Shenzhen RoadRover into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lutian Machinery Co and Shenzhen RoadRover Technology, you can compare the effects of market volatilities on Lutian Machinery and Shenzhen RoadRover 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 Lutian Machinery with a short position of Shenzhen RoadRover. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lutian Machinery and Shenzhen RoadRover.

Diversification Opportunities for Lutian Machinery and Shenzhen RoadRover

0.09

Correlation Coefficient

Lutian Machinery  Shenzhen RoadRover

Significant diversification

The 3 months correlation between Lutian and Shenzhen is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lutian Machinery Co and Shenzhen RoadRover Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen RoadRover and Lutian Machinery 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 Lutian Machinery Co are associated (or correlated) with Shenzhen RoadRover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen RoadRover has no effect on the direction of Lutian Machinery i.e., Lutian Machinery and Shenzhen RoadRover go up and down completely randomly.

Pair Corralation between Lutian Machinery and Shenzhen RoadRover

Assuming the 90 days trading horizon Lutian Machinery Co is expected to generate 0.74 times more return on investment than Shenzhen RoadRover. However, Lutian Machinery Co is 1.36 times less risky than Shenzhen RoadRover. It trades about 0.12 of its potential returns per unit of risk. Shenzhen RoadRover Technology is currently generating about -0.09 per unit of risk. If you would invest  1,377  in Lutian Machinery Co on October 23, 2024 and sell it today you would earn a total of  199.00  from holding Lutian Machinery Co or generate 14.45% return on investment over 90 days.

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

Lutian Machinery Co  vs.  Shenzhen RoadRover Technology

Lutian Machinery

Risk-Adjusted Performance

9 of 100

OK

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

Shenzhen RoadRover

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen RoadRover Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lutian Machinery and Shenzhen RoadRover

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

The idea behind Lutian Machinery Co and Shenzhen RoadRover Technology 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.