Correlation Between Long Giang and Sea Air

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

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

Diversification Opportunities for Long Giang and Sea Air

-0.38

Correlation Coefficient

Long Giang  Sea Air

Very good diversification

The 3 months correlation between Long and Sea is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Long Giang Investment and Sea Air Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Air Freight and Long Giang 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 Giang Investment are associated (or correlated) with Sea Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Air Freight has no effect on the direction of Long Giang i.e., Long Giang and Sea Air go up and down completely randomly.

Pair Corralation between Long Giang and Sea Air

Assuming the 90 days trading horizon Long Giang Investment is expected to generate 1.44 times more return on investment than Sea Air. However, Long Giang is 1.44 times more volatile than Sea Air Freight. It trades about 0.18 of its potential returns per unit of risk. Sea Air Freight is currently generating about 0.03 per unit of risk. If you would invest  241,000  in Long Giang Investment on December 20, 2024 and sell it today you would earn a total of  64,000  from holding Long Giang Investment or generate 26.56% return on investment over 90 days.

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

Long Giang Investment  vs.  Sea Air Freight

Long Giang Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Long Giang Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Long Giang displayed solid returns over the last few months and may actually be approaching a breakup point.

Sea Air Freight

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Air Freight are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Sea Air is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Long Giang and Sea Air

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

The idea behind Long Giang Investment and Sea Air Freight 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.