Correlation Between Hongli Group and Lsb Industries

Can any of the company-specific risk be diversified away by investing in both Hongli Group and Lsb Industries 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 Hongli Group and Lsb Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hongli Group Ordinary and Lsb Industries, you can compare the effects of market volatilities on Hongli Group and Lsb Industries 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 Hongli Group with a short position of Lsb Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hongli Group and Lsb Industries.

Diversification Opportunities for Hongli Group and Lsb Industries

-0.82

Correlation Coefficient

Hongli Group  Lsb Industries

Pay attention - limited upside

The 3 months correlation between Hongli and Lsb is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Hongli Group Ordinary and Lsb Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsb Industries and Hongli Group 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 Hongli Group Ordinary are associated (or correlated) with Lsb Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsb Industries has no effect on the direction of Hongli Group i.e., Hongli Group and Lsb Industries go up and down completely randomly.

Pair Corralation between Hongli Group and Lsb Industries

Considering the 90-day investment horizon Hongli Group Ordinary is expected to under-perform the Lsb Industries. In addition to that, Hongli Group is 2.11 times more volatile than Lsb Industries. It trades about -0.06 of its total potential returns per unit of risk. Lsb Industries is currently generating about 0.11 per unit of volatility. If you would invest  842.00  in Lsb Industries on September 3, 2024 and sell it today you would earn a total of  41.00  from holding Lsb Industries or generate 4.87% return on investment over 90 days.

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

Hongli Group Ordinary  vs.  Lsb Industries

Hongli Group Ordinary

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hongli Group Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Lsb Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lsb Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Lsb Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hongli Group and Lsb Industries

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

The idea behind Hongli Group Ordinary and Lsb Industries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..