Correlation Between Lutian Machinery and Jiangsu Jinling

Can any of the company-specific risk be diversified away by investing in both Lutian Machinery and Jiangsu Jinling 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 Jiangsu Jinling 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 Jiangsu Jinling Sports, you can compare the effects of market volatilities on Lutian Machinery and Jiangsu Jinling 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 Jiangsu Jinling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lutian Machinery and Jiangsu Jinling.

Diversification Opportunities for Lutian Machinery and Jiangsu Jinling

0.59

Correlation Coefficient

Lutian Machinery  Jiangsu Jinling

Very weak diversification

The 3 months correlation between Lutian and Jiangsu is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lutian Machinery Co and Jiangsu Jinling Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Jinling Sports 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 Jiangsu Jinling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Jinling Sports has no effect on the direction of Lutian Machinery i.e., Lutian Machinery and Jiangsu Jinling go up and down completely randomly.

Pair Corralation between Lutian Machinery and Jiangsu Jinling

Assuming the 90 days trading horizon Lutian Machinery Co is expected to generate 0.68 times more return on investment than Jiangsu Jinling. However, Lutian Machinery Co is 1.47 times less risky than Jiangsu Jinling. It trades about 0.13 of its potential returns per unit of risk. Jiangsu Jinling Sports is currently generating about 0.04 per unit of risk. If you would invest  1,528  in Lutian Machinery Co on December 30, 2024 and sell it today you would earn a total of  191.00  from holding Lutian Machinery Co or generate 12.5% return on investment over 90 days.

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

Lutian Machinery Co  vs.  Jiangsu Jinling Sports

Lutian Machinery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lutian Machinery Co are ranked lower than 10 (%) 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.

Jiangsu Jinling Sports

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Jinling Sports are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Jinling may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lutian Machinery and Jiangsu Jinling

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

The idea behind Lutian Machinery Co and Jiangsu Jinling Sports 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.