Correlation Between LOANDEPOT INC and CHINA HUARONG

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Can any of the company-specific risk be diversified away by investing in both LOANDEPOT INC and CHINA HUARONG 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 LOANDEPOT INC and CHINA HUARONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOANDEPOT INC A and CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on LOANDEPOT INC and CHINA HUARONG 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 LOANDEPOT INC with a short position of CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOANDEPOT INC and CHINA HUARONG.

Diversification Opportunities for LOANDEPOT INC and CHINA HUARONG

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between LOANDEPOT and CHINA is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding LOANDEPOT INC A and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD and LOANDEPOT INC 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 LOANDEPOT INC A are associated (or correlated) with CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of LOANDEPOT INC i.e., LOANDEPOT INC and CHINA HUARONG go up and down completely randomly.

Pair Corralation between LOANDEPOT INC and CHINA HUARONG

Assuming the 90 days horizon LOANDEPOT INC A is expected to generate 0.22 times more return on investment than CHINA HUARONG. However, LOANDEPOT INC A is 4.56 times less risky than CHINA HUARONG. It trades about -0.11 of its potential returns per unit of risk. CHINA HUARONG ENERHD 50 is currently generating about -0.03 per unit of risk. If you would invest  214.00  in LOANDEPOT INC A on September 18, 2024 and sell it today you would lose (17.00) from holding LOANDEPOT INC A or give up 7.94% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

LOANDEPOT INC A  vs.  CHINA HUARONG ENERHD 50

 Performance 
       Timeline  
LOANDEPOT INC A 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LOANDEPOT INC A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
CHINA HUARONG ENERHD 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CHINA HUARONG ENERHD 50 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA HUARONG reported solid returns over the last few months and may actually be approaching a breakup point.

LOANDEPOT INC and CHINA HUARONG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LOANDEPOT INC and CHINA HUARONG

The main advantage of trading using opposite LOANDEPOT INC and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOANDEPOT INC position performs unexpectedly, CHINA HUARONG 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 CHINA HUARONG will offset losses from the drop in CHINA HUARONG's long position.
The idea behind LOANDEPOT INC A and CHINA HUARONG ENERHD 50 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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