Correlation Between Longmaster Information and Guangzhou Seagull

Can any of the company-specific risk be diversified away by investing in both Longmaster Information and Guangzhou Seagull 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 Guangzhou Seagull 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 Guangzhou Seagull Kitchen, you can compare the effects of market volatilities on Longmaster Information and Guangzhou Seagull 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 Guangzhou Seagull. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longmaster Information and Guangzhou Seagull.

Diversification Opportunities for Longmaster Information and Guangzhou Seagull

0.91

Correlation Coefficient

Longmaster Information  Guangzhou Seagull

Almost no diversification

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

Pair Corralation between Longmaster Information and Guangzhou Seagull

Assuming the 90 days trading horizon Longmaster Information Tech is expected to generate 1.7 times more return on investment than Guangzhou Seagull. However, Longmaster Information is 1.7 times more volatile than Guangzhou Seagull Kitchen. It trades about 0.16 of its potential returns per unit of risk. Guangzhou Seagull Kitchen is currently generating about 0.21 per unit of risk. If you would invest  1,109  in Longmaster Information Tech on September 3, 2024 and sell it today you would earn a total of  472.00  from holding Longmaster Information Tech or generate 42.56% 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.  Guangzhou Seagull Kitchen

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.

Guangzhou Seagull Kitchen

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Longmaster Information and Guangzhou Seagull

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

The idea behind Longmaster Information Tech and Guangzhou Seagull Kitchen 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.