Correlation Between Leyard Optoelectronic and Gansu Jiu

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

By analyzing existing cross correlation between Leyard Optoelectronic and Gansu Jiu Steel, you can compare the effects of market volatilities on Leyard Optoelectronic and Gansu Jiu 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 Leyard Optoelectronic with a short position of Gansu Jiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leyard Optoelectronic and Gansu Jiu.

Diversification Opportunities for Leyard Optoelectronic and Gansu Jiu

0.85

Correlation Coefficient

Leyard Optoelectronic  Gansu Jiu

Very poor diversification

The 3 months correlation between Leyard and Gansu is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Leyard Optoelectronic and Gansu Jiu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Jiu Steel and Leyard Optoelectronic 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 Leyard Optoelectronic are associated (or correlated) with Gansu Jiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Jiu Steel has no effect on the direction of Leyard Optoelectronic i.e., Leyard Optoelectronic and Gansu Jiu go up and down completely randomly.

Pair Corralation between Leyard Optoelectronic and Gansu Jiu

Assuming the 90 days trading horizon Leyard Optoelectronic is expected to generate 1.01 times more return on investment than Gansu Jiu. However, Leyard Optoelectronic is 1.01 times more volatile than Gansu Jiu Steel. It trades about 0.22 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about 0.2 per unit of risk. If you would invest  398.00  in Leyard Optoelectronic on September 12, 2024 and sell it today you would earn a total of  242.00  from holding Leyard Optoelectronic or generate 60.8% return on investment over 90 days.

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

Leyard Optoelectronic  vs.  Gansu Jiu Steel

Leyard Optoelectronic

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Leyard Optoelectronic are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Leyard Optoelectronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Gansu Jiu Steel

Risk-Adjusted Performance

15 of 100

Solid

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

Pair Trading with Leyard Optoelectronic and Gansu Jiu

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

The idea behind Leyard Optoelectronic and Gansu Jiu Steel 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.