Correlation Between Excellence Optoelectronic and Lumax International

Can any of the company-specific risk be diversified away by investing in both Excellence Optoelectronic and Lumax International 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 Excellence Optoelectronic and Lumax International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Excellence Optoelectronic and Lumax International Corp, you can compare the effects of market volatilities on Excellence Optoelectronic and Lumax International 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 Excellence Optoelectronic with a short position of Lumax International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Excellence Optoelectronic and Lumax International.

Diversification Opportunities for Excellence Optoelectronic and Lumax International

-0.17

Correlation Coefficient

Excellence Optoelectronic  Lumax International

Good diversification

The 3 months correlation between Excellence and Lumax is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Excellence Optoelectronic and Lumax International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumax International Corp and Excellence Optoelectronic 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 Excellence Optoelectronic are associated (or correlated) with Lumax International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumax International Corp has no effect on the direction of Excellence Optoelectronic i.e., Excellence Optoelectronic and Lumax International go up and down completely randomly.

Pair Corralation between Excellence Optoelectronic and Lumax International

Assuming the 90 days trading horizon Excellence Optoelectronic is expected to generate 2.17 times more return on investment than Lumax International. However, Excellence Optoelectronic is 2.17 times more volatile than Lumax International Corp. It trades about -0.02 of its potential returns per unit of risk. Lumax International Corp is currently generating about -0.04 per unit of risk. If you would invest  2,790  in Excellence Optoelectronic on October 8, 2024 and sell it today you would lose (170.00) from holding Excellence Optoelectronic or give up 6.09% of portfolio value over 90 days.

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

Excellence Optoelectronic  vs.  Lumax International Corp

Excellence Optoelectronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Excellence Optoelectronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Excellence Optoelectronic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lumax International Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lumax International Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lumax International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Excellence Optoelectronic and Lumax International

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

The idea behind Excellence Optoelectronic and Lumax International Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.