Correlation Between Lutian Machinery and Sanbo Hospital

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

Diversification Opportunities for Lutian Machinery and Sanbo Hospital

0.81

Correlation Coefficient

Lutian Machinery  Sanbo Hospital

Very poor diversification

The 3 months correlation between Lutian and Sanbo is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lutian Machinery Co and Sanbo Hospital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanbo Hospital Management 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 Sanbo Hospital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanbo Hospital Management has no effect on the direction of Lutian Machinery i.e., Lutian Machinery and Sanbo Hospital go up and down completely randomly.

Pair Corralation between Lutian Machinery and Sanbo Hospital

Assuming the 90 days trading horizon Lutian Machinery Co is expected to under-perform the Sanbo Hospital. But the stock apears to be less risky and, when comparing its historical volatility, Lutian Machinery Co is 2.24 times less risky than Sanbo Hospital. The stock trades about 0.0 of its potential returns per unit of risk. The Sanbo Hospital Management is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,960  in Sanbo Hospital Management on October 4, 2024 and sell it today you would earn a total of  1,368  from holding Sanbo Hospital Management or generate 46.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	85.53%
Values	Daily Returns

Lutian Machinery Co  vs.  Sanbo Hospital Management

Lutian Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sanbo Hospital Management

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lutian Machinery and Sanbo Hospital

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

The idea behind Lutian Machinery Co and Sanbo Hospital Management 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.