Correlation Between Guotai Epoint and Lutian Machinery

Can any of the company-specific risk be diversified away by investing in both Guotai Epoint and Lutian Machinery 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 Guotai Epoint and Lutian Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guotai Epoint Software and Lutian Machinery Co, you can compare the effects of market volatilities on Guotai Epoint and Lutian Machinery 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 Guotai Epoint with a short position of Lutian Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guotai Epoint and Lutian Machinery.

Diversification Opportunities for Guotai Epoint and Lutian Machinery

-0.15

Correlation Coefficient

Guotai Epoint  Lutian Machinery

Good diversification

The 3 months correlation between Guotai and Lutian is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Guotai Epoint Software and Lutian Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lutian Machinery and Guotai Epoint 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 Guotai Epoint Software are associated (or correlated) with Lutian Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lutian Machinery has no effect on the direction of Guotai Epoint i.e., Guotai Epoint and Lutian Machinery go up and down completely randomly.

Pair Corralation between Guotai Epoint and Lutian Machinery

Assuming the 90 days trading horizon Guotai Epoint Software is expected to under-perform the Lutian Machinery. In addition to that, Guotai Epoint is 1.75 times more volatile than Lutian Machinery Co. It trades about -0.03 of its total potential returns per unit of risk. Lutian Machinery Co is currently generating about -0.01 per unit of volatility. If you would invest  1,783  in Lutian Machinery Co on October 10, 2024 and sell it today you would lose (273.00) from holding Lutian Machinery Co or give up 15.31% of portfolio value over 90 days.

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

Guotai Epoint Software  vs.  Lutian Machinery Co

Guotai Epoint Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guotai Epoint Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lutian Machinery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lutian Machinery Co are ranked lower than 5 (%) 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 February 2025.

Pair Trading with Guotai Epoint and Lutian Machinery

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

The idea behind Guotai Epoint Software and Lutian Machinery Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.