Correlation Between McGrath RentCorp and Lizhan Environmental

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

By analyzing existing cross correlation between McGrath RentCorp and Lizhan Environmental, you can compare the effects of market volatilities on McGrath RentCorp and Lizhan Environmental 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 McGrath RentCorp with a short position of Lizhan Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of McGrath RentCorp and Lizhan Environmental.

Diversification Opportunities for McGrath RentCorp and Lizhan Environmental

0.0

Correlation Coefficient

McGrath RentCorp  Lizhan Environmental

Pay attention - limited upside

The 3 months correlation between McGrath and Lizhan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding McGrath RentCorp and Lizhan Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lizhan Environmental and McGrath RentCorp 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 McGrath RentCorp are associated (or correlated) with Lizhan Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lizhan Environmental has no effect on the direction of McGrath RentCorp i.e., McGrath RentCorp and Lizhan Environmental go up and down completely randomly.

Pair Corralation between McGrath RentCorp and Lizhan Environmental

If you would invest  9,396  in McGrath RentCorp on October 11, 2024 and sell it today you would earn a total of  1,770  from holding McGrath RentCorp or generate 18.84% return on investment over 90 days.

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

McGrath RentCorp  vs.  Lizhan Environmental

McGrath RentCorp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in McGrath RentCorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, McGrath RentCorp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Lizhan Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with McGrath RentCorp and Lizhan Environmental

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

The idea behind McGrath RentCorp and Lizhan Environmental 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.