Correlation Between Integrated Electronic and LianChuang Electronic

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

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

Diversification Opportunities for Integrated Electronic and LianChuang Electronic

0.86

Correlation Coefficient

Integrated Electronic  LianChuang Electronic

Very poor diversification

The 3 months correlation between Integrated and LianChuang is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Integrated Electronic Systems and LianChuang Electronic Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LianChuang Electronic and Integrated 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 Integrated Electronic Systems are associated (or correlated) with LianChuang Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LianChuang Electronic has no effect on the direction of Integrated Electronic i.e., Integrated Electronic and LianChuang Electronic go up and down completely randomly.

Pair Corralation between Integrated Electronic and LianChuang Electronic

Assuming the 90 days trading horizon Integrated Electronic is expected to generate 1.3 times less return on investment than LianChuang Electronic. But when comparing it to its historical volatility, Integrated Electronic Systems is 1.31 times less risky than LianChuang Electronic. It trades about 0.21 of its potential returns per unit of risk. LianChuang Electronic Technology is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  649.00  in LianChuang Electronic Technology on September 15, 2024 and sell it today you would earn a total of  409.00  from holding LianChuang Electronic Technology or generate 63.02% return on investment over 90 days.

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

Integrated Electronic Systems  vs.  LianChuang Electronic Technolo

Integrated Electronic

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Integrated Electronic Systems are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Integrated Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

LianChuang Electronic

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LianChuang Electronic Technology are ranked lower than 16 (%) 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.

Pair Trading with Integrated Electronic and LianChuang Electronic

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

The idea behind Integrated Electronic Systems and LianChuang Electronic Technology 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.