Correlation Between Longmaster Information and Dezhan HealthCare

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

By analyzing existing cross correlation between Longmaster Information Tech and Dezhan HealthCare Co, you can compare the effects of market volatilities on Longmaster Information and Dezhan HealthCare 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 Longmaster Information with a short position of Dezhan HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longmaster Information and Dezhan HealthCare.

Diversification Opportunities for Longmaster Information and Dezhan HealthCare

0.95

Correlation Coefficient

Longmaster Information  Dezhan HealthCare

Almost no diversification

The 3 months correlation between Longmaster and Dezhan is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Longmaster Information Tech and Dezhan HealthCare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dezhan HealthCare and Longmaster Information 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 Longmaster Information Tech are associated (or correlated) with Dezhan HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dezhan HealthCare has no effect on the direction of Longmaster Information i.e., Longmaster Information and Dezhan HealthCare go up and down completely randomly.

Pair Corralation between Longmaster Information and Dezhan HealthCare

Assuming the 90 days trading horizon Longmaster Information Tech is expected to generate 1.47 times more return on investment than Dezhan HealthCare. However, Longmaster Information is 1.47 times more volatile than Dezhan HealthCare Co. It trades about 0.16 of its potential returns per unit of risk. Dezhan HealthCare Co is currently generating about 0.17 per unit of risk. If you would invest  1,090  in Longmaster Information Tech on September 2, 2024 and sell it today you would earn a total of  491.00  from holding Longmaster Information Tech or generate 45.05% return on investment over 90 days.

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

Longmaster Information Tech  vs.  Dezhan HealthCare Co

Longmaster Information

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Longmaster Information Tech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Longmaster Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Dezhan HealthCare

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Longmaster Information and Dezhan HealthCare

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

The idea behind Longmaster Information Tech and Dezhan HealthCare 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.