Correlation Between Loctek Ergonomic and Gan Yuan

Can any of the company-specific risk be diversified away by investing in both Loctek Ergonomic and Gan Yuan 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 Loctek Ergonomic and Gan Yuan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Loctek Ergonomic Technology and Gan Yuan Foods, you can compare the effects of market volatilities on Loctek Ergonomic and Gan Yuan 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 Loctek Ergonomic with a short position of Gan Yuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loctek Ergonomic and Gan Yuan.

Diversification Opportunities for Loctek Ergonomic and Gan Yuan

0.79

Correlation Coefficient

Loctek Ergonomic  Gan Yuan

Poor diversification

The 3 months correlation between Loctek and Gan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and Gan Yuan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gan Yuan Foods and Loctek Ergonomic 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 Loctek Ergonomic Technology are associated (or correlated) with Gan Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gan Yuan Foods has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and Gan Yuan go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and Gan Yuan

Assuming the 90 days trading horizon Loctek Ergonomic Technology is expected to under-perform the Gan Yuan. In addition to that, Loctek Ergonomic is 1.07 times more volatile than Gan Yuan Foods. It trades about -0.02 of its total potential returns per unit of risk. Gan Yuan Foods is currently generating about 0.4 per unit of volatility. If you would invest  7,265  in Gan Yuan Foods on September 23, 2024 and sell it today you would earn a total of  1,606  from holding Gan Yuan Foods or generate 22.11% return on investment over 90 days.

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

Loctek Ergonomic Technology  vs.  Gan Yuan Foods

Loctek Ergonomic Tec

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loctek Ergonomic Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Loctek Ergonomic sustained solid returns over the last few months and may actually be approaching a breakup point.

Gan Yuan Foods

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gan Yuan Foods are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gan Yuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loctek Ergonomic and Gan Yuan

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

The idea behind Loctek Ergonomic Technology and Gan Yuan Foods 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.