Correlation Between Minmetals Capital and Loctek Ergonomic

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

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

Diversification Opportunities for Minmetals Capital and Loctek Ergonomic

0.85

Correlation Coefficient

Minmetals Capital  Loctek Ergonomic

Very poor diversification

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

Pair Corralation between Minmetals Capital and Loctek Ergonomic

Assuming the 90 days trading horizon Minmetals Capital Co is expected to generate 1.43 times more return on investment than Loctek Ergonomic. However, Minmetals Capital is 1.43 times more volatile than Loctek Ergonomic Technology. It trades about 0.24 of its potential returns per unit of risk. Loctek Ergonomic Technology is currently generating about 0.13 per unit of risk. If you would invest  399.00  in Minmetals Capital Co on September 12, 2024 and sell it today you would earn a total of  326.00  from holding Minmetals Capital Co or generate 81.7% return on investment over 90 days.

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

Minmetals Capital Co  vs.  Loctek Ergonomic Technology

Minmetals Capital

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Minmetals Capital Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Minmetals Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Loctek Ergonomic Tec

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loctek Ergonomic Technology are ranked lower than 10 (%) 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.

Pair Trading with Minmetals Capital and Loctek Ergonomic

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

The idea behind Minmetals Capital Co and Loctek Ergonomic 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.