Correlation Between LianChuang Electronic and Xilong Chemical

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

By analyzing existing cross correlation between LianChuang Electronic Technology and Xilong Chemical Co, you can compare the effects of market volatilities on LianChuang Electronic and Xilong Chemical 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 LianChuang Electronic with a short position of Xilong Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of LianChuang Electronic and Xilong Chemical.

Diversification Opportunities for LianChuang Electronic and Xilong Chemical

0.77

Correlation Coefficient

LianChuang Electronic  Xilong Chemical

Poor diversification

The 3 months correlation between LianChuang and Xilong is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding LianChuang Electronic Technolo and Xilong Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xilong Chemical and LianChuang Electronic 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 LianChuang Electronic Technology are associated (or correlated) with Xilong Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xilong Chemical has no effect on the direction of LianChuang Electronic i.e., LianChuang Electronic and Xilong Chemical go up and down completely randomly.

Pair Corralation between LianChuang Electronic and Xilong Chemical

Assuming the 90 days trading horizon LianChuang Electronic Technology is expected to under-perform the Xilong Chemical. But the stock apears to be less risky and, when comparing its historical volatility, LianChuang Electronic Technology is 1.07 times less risky than Xilong Chemical. The stock trades about 0.0 of its potential returns per unit of risk. The Xilong Chemical Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  685.00  in Xilong Chemical Co on September 28, 2024 and sell it today you would earn a total of  80.00  from holding Xilong Chemical Co or generate 11.68% return on investment over 90 days.

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

LianChuang Electronic Technolo  vs.  Xilong Chemical Co

LianChuang Electronic

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LianChuang Electronic Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LianChuang Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Xilong Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xilong Chemical Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xilong Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LianChuang Electronic and Xilong Chemical

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

The idea behind LianChuang Electronic Technology and Xilong Chemical Co 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.