Correlation Between Eason Technology and LM Funding

Can any of the company-specific risk be diversified away by investing in both Eason Technology and LM Funding 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 Eason Technology and LM Funding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eason Technology Limited and LM Funding America, you can compare the effects of market volatilities on Eason Technology and LM Funding 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 Eason Technology with a short position of LM Funding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eason Technology and LM Funding.

Diversification Opportunities for Eason Technology and LM Funding

-0.49

Correlation Coefficient

Eason Technology  LM Funding

Very good diversification

The 3 months correlation between Eason and LMFA is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Eason Technology Limited and LM Funding America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LM Funding America and Eason Technology 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 Eason Technology Limited are associated (or correlated) with LM Funding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LM Funding America has no effect on the direction of Eason Technology i.e., Eason Technology and LM Funding go up and down completely randomly.

Pair Corralation between Eason Technology and LM Funding

Considering the 90-day investment horizon Eason Technology Limited is expected to generate 6.09 times more return on investment than LM Funding. However, Eason Technology is 6.09 times more volatile than LM Funding America. It trades about 0.07 of its potential returns per unit of risk. LM Funding America is currently generating about 0.0 per unit of risk. If you would invest  2,900  in Eason Technology Limited on November 28, 2024 and sell it today you would lose (1,778) from holding Eason Technology Limited or give up 61.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.65%
Values	Daily Returns

Eason Technology Limited  vs.  LM Funding America

Eason Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eason Technology Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Eason Technology reported solid returns over the last few months and may actually be approaching a breakup point.

LM Funding America

Risk-Adjusted Performance

Very Weak

Over the last 90 days LM Funding America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Eason Technology and LM Funding

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

The idea behind Eason Technology Limited and LM Funding America 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.