Correlation Between Marks and Lianhua Supermarket

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

By analyzing existing cross correlation between Marks and Spencer and Lianhua Supermarket Holdings, you can compare the effects of market volatilities on Marks and Lianhua Supermarket 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 Marks with a short position of Lianhua Supermarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marks and Lianhua Supermarket.

Diversification Opportunities for Marks and Lianhua Supermarket

-0.09

Correlation Coefficient

Marks  Lianhua Supermarket

Good diversification

The 3 months correlation between Marks and Lianhua is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Marks and Spencer and Lianhua Supermarket Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lianhua Supermarket and Marks 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 Marks and Spencer are associated (or correlated) with Lianhua Supermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lianhua Supermarket has no effect on the direction of Marks i.e., Marks and Lianhua Supermarket go up and down completely randomly.

Pair Corralation between Marks and Lianhua Supermarket

Assuming the 90 days horizon Marks and Spencer is expected to under-perform the Lianhua Supermarket. But the stock apears to be less risky and, when comparing its historical volatility, Marks and Spencer is 3.49 times less risky than Lianhua Supermarket. The stock trades about -0.07 of its potential returns per unit of risk. The Lianhua Supermarket Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.35  in Lianhua Supermarket Holdings on December 21, 2024 and sell it today you would earn a total of  0.45  from holding Lianhua Supermarket Holdings or generate 19.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Marks and Spencer  vs.  Lianhua Supermarket Holdings

Marks and Spencer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marks and Spencer 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Lianhua Supermarket

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lianhua Supermarket Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Lianhua Supermarket reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marks and Lianhua Supermarket

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

The idea behind Marks and Spencer and Lianhua Supermarket Holdings 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.

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.