Correlation Between Linedata Services and Anhui Conch

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

By analyzing existing cross correlation between Linedata Services SA and Anhui Conch Cement, you can compare the effects of market volatilities on Linedata Services and Anhui Conch 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 Linedata Services with a short position of Anhui Conch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linedata Services and Anhui Conch.

Diversification Opportunities for Linedata Services and Anhui Conch

-0.52

Correlation Coefficient

Linedata Services  Anhui Conch

Excellent diversification

The 3 months correlation between Linedata and Anhui is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Linedata Services SA and Anhui Conch Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Conch Cement and Linedata Services 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 Linedata Services SA are associated (or correlated) with Anhui Conch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Conch Cement has no effect on the direction of Linedata Services i.e., Linedata Services and Anhui Conch go up and down completely randomly.

Pair Corralation between Linedata Services and Anhui Conch

Assuming the 90 days trading horizon Linedata Services SA is expected to generate 0.54 times more return on investment than Anhui Conch. However, Linedata Services SA is 1.85 times less risky than Anhui Conch. It trades about 0.02 of its potential returns per unit of risk. Anhui Conch Cement is currently generating about -0.01 per unit of risk. If you would invest  7,980  in Linedata Services SA on October 26, 2024 and sell it today you would earn a total of  100.00  from holding Linedata Services SA or generate 1.25% return on investment over 90 days.

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

Linedata Services SA  vs.  Anhui Conch Cement

Linedata Services

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Linedata Services SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Linedata Services is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Anhui Conch Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Conch Cement has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Anhui Conch is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Linedata Services and Anhui Conch

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

The idea behind Linedata Services SA and Anhui Conch Cement 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.