Correlation Between AVIC UAS and Lutian Machinery

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

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

Diversification Opportunities for AVIC UAS and Lutian Machinery

-0.16

Correlation Coefficient

AVIC UAS  Lutian Machinery

Good diversification

The 3 months correlation between AVIC and Lutian is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding AVIC UAS Co and Lutian Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lutian Machinery and AVIC UAS 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 AVIC UAS Co 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 AVIC UAS i.e., AVIC UAS and Lutian Machinery go up and down completely randomly.

Pair Corralation between AVIC UAS and Lutian Machinery

Assuming the 90 days trading horizon AVIC UAS Co is expected to generate 1.53 times more return on investment than Lutian Machinery. However, AVIC UAS is 1.53 times more volatile than Lutian Machinery Co. It trades about 0.0 of its potential returns per unit of risk. Lutian Machinery Co is currently generating about -0.01 per unit of risk. If you would invest  4,926  in AVIC UAS Co on October 26, 2024 and sell it today you would lose (1,216) from holding AVIC UAS Co or give up 24.69% of portfolio value over 90 days.

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

AVIC UAS Co  vs.  Lutian Machinery Co

AVIC UAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVIC UAS Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lutian Machinery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lutian Machinery Co are ranked lower than 6 (%) 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 AVIC UAS and Lutian Machinery

The main advantage of trading using opposite AVIC UAS and Lutian Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVIC UAS 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 AVIC UAS Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.