Correlation Between Zhejiang Orient and Guangdong Lvtong

Can any of the company-specific risk be diversified away by investing in both Zhejiang Orient and Guangdong Lvtong 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 Zhejiang Orient and Guangdong Lvtong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Orient Gene and Guangdong Lvtong New, you can compare the effects of market volatilities on Zhejiang Orient and Guangdong Lvtong 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 Zhejiang Orient with a short position of Guangdong Lvtong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Orient and Guangdong Lvtong.

Diversification Opportunities for Zhejiang Orient and Guangdong Lvtong

0.74

Correlation Coefficient

Zhejiang Orient  Guangdong Lvtong

Poor diversification

The 3 months correlation between Zhejiang and Guangdong is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Orient Gene and Guangdong Lvtong New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Lvtong New and Zhejiang Orient 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 Zhejiang Orient Gene are associated (or correlated) with Guangdong Lvtong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Lvtong New has no effect on the direction of Zhejiang Orient i.e., Zhejiang Orient and Guangdong Lvtong go up and down completely randomly.

Pair Corralation between Zhejiang Orient and Guangdong Lvtong

Assuming the 90 days trading horizon Zhejiang Orient Gene is expected to under-perform the Guangdong Lvtong. But the stock apears to be less risky and, when comparing its historical volatility, Zhejiang Orient Gene is 1.15 times less risky than Guangdong Lvtong. The stock trades about 0.0 of its potential returns per unit of risk. The Guangdong Lvtong New is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,222  in Guangdong Lvtong New on December 28, 2024 and sell it today you would earn a total of  378.00  from holding Guangdong Lvtong New or generate 17.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Zhejiang Orient Gene  vs.  Guangdong Lvtong New

Zhejiang Orient Gene

Risk-Adjusted Performance

Modest

Over the last 90 days Zhejiang Orient Gene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhejiang Orient is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangdong Lvtong New

Risk-Adjusted Performance

OK

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

Pair Trading with Zhejiang Orient and Guangdong Lvtong

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

The idea behind Zhejiang Orient Gene and Guangdong Lvtong New 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.