Correlation Between Linzhou Heavy and Soyea Technology

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

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

Diversification Opportunities for Linzhou Heavy and Soyea Technology

0.9

Correlation Coefficient

Linzhou Heavy  Soyea Technology

Almost no diversification

The 3 months correlation between Linzhou and Soyea is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Linzhou Heavy Machinery and Soyea Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soyea Technology and Linzhou Heavy 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 Linzhou Heavy Machinery are associated (or correlated) with Soyea Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soyea Technology has no effect on the direction of Linzhou Heavy i.e., Linzhou Heavy and Soyea Technology go up and down completely randomly.

Pair Corralation between Linzhou Heavy and Soyea Technology

Assuming the 90 days trading horizon Linzhou Heavy is expected to generate 1.75 times less return on investment than Soyea Technology. In addition to that, Linzhou Heavy is 1.13 times more volatile than Soyea Technology Co. It trades about 0.23 of its total potential returns per unit of risk. Soyea Technology Co is currently generating about 0.46 per unit of volatility. If you would invest  327.00  in Soyea Technology Co on September 14, 2024 and sell it today you would earn a total of  331.00  from holding Soyea Technology Co or generate 101.22% return on investment over 90 days.

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

Linzhou Heavy Machinery  vs.  Soyea Technology Co

Linzhou Heavy Machinery

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Linzhou Heavy Machinery are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linzhou Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Soyea Technology

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Soyea Technology Co are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Soyea Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Linzhou Heavy and Soyea Technology

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

The idea behind Linzhou Heavy Machinery and Soyea Technology 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.