Correlation Between Lihtai Construction and ThinTech Materials

Can any of the company-specific risk be diversified away by investing in both Lihtai Construction and ThinTech Materials 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 Lihtai Construction and ThinTech Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lihtai Construction Enterprise and ThinTech Materials Technology, you can compare the effects of market volatilities on Lihtai Construction and ThinTech Materials 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 Lihtai Construction with a short position of ThinTech Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lihtai Construction and ThinTech Materials.

Diversification Opportunities for Lihtai Construction and ThinTech Materials

-0.42

Correlation Coefficient

Lihtai Construction  ThinTech Materials

Very good diversification

The 3 months correlation between Lihtai and ThinTech is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lihtai Construction Enterprise and ThinTech Materials Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ThinTech Materials and Lihtai Construction 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 Lihtai Construction Enterprise are associated (or correlated) with ThinTech Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ThinTech Materials has no effect on the direction of Lihtai Construction i.e., Lihtai Construction and ThinTech Materials go up and down completely randomly.

Pair Corralation between Lihtai Construction and ThinTech Materials

Assuming the 90 days trading horizon Lihtai Construction Enterprise is expected to generate 0.18 times more return on investment than ThinTech Materials. However, Lihtai Construction Enterprise is 5.48 times less risky than ThinTech Materials. It trades about -0.03 of its potential returns per unit of risk. ThinTech Materials Technology is currently generating about -0.13 per unit of risk. If you would invest  8,250  in Lihtai Construction Enterprise on September 29, 2024 and sell it today you would lose (90.00) from holding Lihtai Construction Enterprise or give up 1.09% of portfolio value over 90 days.

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

Lihtai Construction Enterprise  vs.  ThinTech Materials Technology

Lihtai Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lihtai Construction Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lihtai Construction is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ThinTech Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ThinTech Materials Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lihtai Construction and ThinTech Materials

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

The idea behind Lihtai Construction Enterprise and ThinTech Materials Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.