Correlation Between Shanghai Yaoji and Lutian Machinery

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

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

Diversification Opportunities for Shanghai Yaoji and Lutian Machinery

0.91

Correlation Coefficient

Shanghai Yaoji  Lutian Machinery

Almost no diversification

The 3 months correlation between Shanghai and Lutian is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Yaoji Playing and Lutian Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lutian Machinery and Shanghai Yaoji 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 Shanghai Yaoji Playing are associated (or correlated) with Lutian Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lutian Machinery has no effect on the direction of Shanghai Yaoji i.e., Shanghai Yaoji and Lutian Machinery go up and down completely randomly.

Pair Corralation between Shanghai Yaoji and Lutian Machinery

Assuming the 90 days trading horizon Shanghai Yaoji Playing is expected to generate 1.79 times more return on investment than Lutian Machinery. However, Shanghai Yaoji is 1.79 times more volatile than Lutian Machinery Co. It trades about 0.2 of its potential returns per unit of risk. Lutian Machinery Co is currently generating about 0.17 per unit of risk. If you would invest  2,021  in Shanghai Yaoji Playing on August 31, 2024 and sell it today you would earn a total of  1,157  from holding Shanghai Yaoji Playing or generate 57.25% return on investment over 90 days.

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

Shanghai Yaoji Playing  vs.  Lutian Machinery Co

Shanghai Yaoji Playing

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Yaoji Playing are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Yaoji sustained solid returns over the last few months and may actually be approaching a breakup point.

Lutian Machinery

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lutian Machinery Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lutian Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Yaoji and Lutian Machinery

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

The idea behind Shanghai Yaoji Playing and Lutian Machinery 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 CEOs Directory module to screen CEOs from public companies around the world.