Correlation Between Lungyen Life and IBASE Technology

Can any of the company-specific risk be diversified away by investing in both Lungyen Life and IBASE Technology 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 Lungyen Life and IBASE Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lungyen Life Service and IBASE Technology, you can compare the effects of market volatilities on Lungyen Life and IBASE Technology 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 Lungyen Life with a short position of IBASE Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lungyen Life and IBASE Technology.

Diversification Opportunities for Lungyen Life and IBASE Technology

-0.6

Correlation Coefficient

Lungyen Life  IBASE Technology

Excellent diversification

The 3 months correlation between Lungyen and IBASE is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lungyen Life Service and IBASE Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBASE Technology and Lungyen Life 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 Lungyen Life Service are associated (or correlated) with IBASE Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBASE Technology has no effect on the direction of Lungyen Life i.e., Lungyen Life and IBASE Technology go up and down completely randomly.

Pair Corralation between Lungyen Life and IBASE Technology

Assuming the 90 days trading horizon Lungyen Life Service is expected to generate 1.26 times more return on investment than IBASE Technology. However, Lungyen Life is 1.26 times more volatile than IBASE Technology. It trades about 0.03 of its potential returns per unit of risk. IBASE Technology is currently generating about -0.05 per unit of risk. If you would invest  5,220  in Lungyen Life Service on September 30, 2024 and sell it today you would earn a total of  280.00  from holding Lungyen Life Service or generate 5.36% return on investment over 90 days.

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

Lungyen Life Service  vs.  IBASE Technology

Lungyen Life Service

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lungyen Life Service are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lungyen Life showed solid returns over the last few months and may actually be approaching a breakup point.

IBASE Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lungyen Life and IBASE Technology

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

The idea behind Lungyen Life Service and IBASE 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .