Correlation Between Lutian Machinery and A Zenith

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

Diversification Opportunities for Lutian Machinery and A Zenith

0.12

Correlation Coefficient

Lutian Machinery  A Zenith

Average diversification

The 3 months correlation between Lutian and 603389 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Lutian Machinery Co and A Zenith Home Furnishings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A Zenith Home 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 A Zenith. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A Zenith Home has no effect on the direction of Lutian Machinery i.e., Lutian Machinery and A Zenith go up and down completely randomly.

Pair Corralation between Lutian Machinery and A Zenith

Assuming the 90 days trading horizon Lutian Machinery Co is expected to generate 0.44 times more return on investment than A Zenith. However, Lutian Machinery Co is 2.29 times less risky than A Zenith. It trades about 0.19 of its potential returns per unit of risk. A Zenith Home Furnishings is currently generating about 0.08 per unit of risk. If you would invest  1,500  in Lutian Machinery Co on December 11, 2024 and sell it today you would earn a total of  171.00  from holding Lutian Machinery Co or generate 11.4% 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.  A Zenith Home Furnishings

Lutian Machinery

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lutian Machinery Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lutian Machinery may actually be approaching a critical reversion point that can send shares even higher in April 2025.

A Zenith Home

Risk-Adjusted Performance

Very Weak

Over the last 90 days A Zenith Home Furnishings 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lutian Machinery and A Zenith

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

The idea behind Lutian Machinery Co and A Zenith Home Furnishings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.