Correlation Between Landstar System and Shengfeng Development

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

By analyzing existing cross correlation between Landstar System and Shengfeng Development Limited, you can compare the effects of market volatilities on Landstar System and Shengfeng Development 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 Landstar System with a short position of Shengfeng Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Landstar System and Shengfeng Development.

Diversification Opportunities for Landstar System and Shengfeng Development

0.2

Correlation Coefficient

Landstar System  Shengfeng Development

Modest diversification

The 3 months correlation between Landstar and Shengfeng is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Landstar System and Shengfeng Development Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shengfeng Development and Landstar System 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 Landstar System are associated (or correlated) with Shengfeng Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shengfeng Development has no effect on the direction of Landstar System i.e., Landstar System and Shengfeng Development go up and down completely randomly.

Pair Corralation between Landstar System and Shengfeng Development

Given the investment horizon of 90 days Landstar System is expected to generate 0.54 times more return on investment than Shengfeng Development. However, Landstar System is 1.85 times less risky than Shengfeng Development. It trades about -0.02 of its potential returns per unit of risk. Shengfeng Development Limited is currently generating about -0.05 per unit of risk. If you would invest  18,269  in Landstar System on September 27, 2024 and sell it today you would lose (778.00) from holding Landstar System or give up 4.26% of portfolio value over 90 days.

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

Landstar System  vs.  Shengfeng Development Limited

Landstar System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Landstar System has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Landstar System is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Shengfeng Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shengfeng Development Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Landstar System and Shengfeng Development

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

The idea behind Landstar System and Shengfeng Development Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.