Correlation Between Eyebright Medical and Longmaster Information

Can any of the company-specific risk be diversified away by investing in both Eyebright Medical and Longmaster Information 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 Eyebright Medical and Longmaster Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eyebright Medical Technology and Longmaster Information Tech, you can compare the effects of market volatilities on Eyebright Medical and Longmaster Information 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 Eyebright Medical with a short position of Longmaster Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eyebright Medical and Longmaster Information.

Diversification Opportunities for Eyebright Medical and Longmaster Information

0.58

Correlation Coefficient

Eyebright Medical  Longmaster Information

Very weak diversification

The 3 months correlation between Eyebright and Longmaster is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Eyebright Medical Technology and Longmaster Information Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longmaster Information and Eyebright Medical 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 Eyebright Medical Technology are associated (or correlated) with Longmaster Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longmaster Information has no effect on the direction of Eyebright Medical i.e., Eyebright Medical and Longmaster Information go up and down completely randomly.

Pair Corralation between Eyebright Medical and Longmaster Information

Assuming the 90 days trading horizon Eyebright Medical is expected to generate 1.47 times less return on investment than Longmaster Information. But when comparing it to its historical volatility, Eyebright Medical Technology is 1.49 times less risky than Longmaster Information. It trades about 0.1 of its potential returns per unit of risk. Longmaster Information Tech is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,492  in Longmaster Information Tech on September 27, 2024 and sell it today you would earn a total of  106.00  from holding Longmaster Information Tech or generate 7.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Eyebright Medical Technology  vs.  Longmaster Information Tech

Eyebright Medical

Risk-Adjusted Performance

3 of 100

Insignificant

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

Longmaster Information

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Longmaster Information Tech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Longmaster Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eyebright Medical and Longmaster Information

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

The idea behind Eyebright Medical Technology and Longmaster Information Tech 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.