Correlation Between Li Bang and Sea

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

By analyzing existing cross correlation between Li Bang International and Sea, you can compare the effects of market volatilities on Li Bang and Sea 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 Li Bang with a short position of Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Bang and Sea.

Diversification Opportunities for Li Bang and Sea

-0.3

Correlation Coefficient

Li Bang  Sea

Very good diversification

The 3 months correlation between LBGJ and Sea is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Li Bang International and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea and Li Bang 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 Li Bang International are associated (or correlated) with Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Li Bang i.e., Li Bang and Sea go up and down completely randomly.

Pair Corralation between Li Bang and Sea

Given the investment horizon of 90 days Li Bang International is expected to under-perform the Sea. In addition to that, Li Bang is 3.27 times more volatile than Sea. It trades about -0.04 of its total potential returns per unit of risk. Sea is currently generating about 0.13 per unit of volatility. If you would invest  11,064  in Sea on October 21, 2024 and sell it today you would earn a total of  444.00  from holding Sea or generate 4.01% return on investment over 90 days.

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

Li Bang International  vs.  Sea

Li Bang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Li Bang International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively steady which may send shares a bit higher in February 2025. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Sea

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Li Bang and Sea

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

The idea behind Li Bang International and Sea 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.