Correlation Between Long An and Southern Rubber

Can any of the company-specific risk be diversified away by investing in both Long An and Southern Rubber 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 Long An and Southern Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Long An Food and Southern Rubber Industry, you can compare the effects of market volatilities on Long An and Southern Rubber 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 Long An with a short position of Southern Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long An and Southern Rubber.

Diversification Opportunities for Long An and Southern Rubber

0.39

Correlation Coefficient

Long An  Southern Rubber

Weak diversification

The 3 months correlation between Long and Southern is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Long An Food and Southern Rubber Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Rubber Industry and Long An 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 Long An Food are associated (or correlated) with Southern Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Rubber Industry has no effect on the direction of Long An i.e., Long An and Southern Rubber go up and down completely randomly.

Pair Corralation between Long An and Southern Rubber

Assuming the 90 days trading horizon Long An Food is expected to generate 1.03 times more return on investment than Southern Rubber. However, Long An is 1.03 times more volatile than Southern Rubber Industry. It trades about 0.12 of its potential returns per unit of risk. Southern Rubber Industry is currently generating about -0.05 per unit of risk. If you would invest  1,654,797  in Long An Food on December 22, 2024 and sell it today you would earn a total of  245,203  from holding Long An Food or generate 14.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.61%
Values	Daily Returns

Long An Food  vs.  Southern Rubber Industry

Long An Food

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Long An Food are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Long An displayed solid returns over the last few months and may actually be approaching a breakup point.

Southern Rubber Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Rubber Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Long An and Southern Rubber

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

The idea behind Long An Food and Southern Rubber Industry 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .