Correlation Between Lutian Machinery and Jiangsu Xinri

Can any of the company-specific risk be diversified away by investing in both Lutian Machinery and Jiangsu Xinri 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 Lutian Machinery and Jiangsu Xinri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lutian Machinery Co and Jiangsu Xinri E Vehicle, you can compare the effects of market volatilities on Lutian Machinery and Jiangsu Xinri 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 Lutian Machinery with a short position of Jiangsu Xinri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lutian Machinery and Jiangsu Xinri.

Diversification Opportunities for Lutian Machinery and Jiangsu Xinri

0.81

Correlation Coefficient

Lutian Machinery  Jiangsu Xinri

Very poor diversification

The 3 months correlation between Lutian and Jiangsu is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lutian Machinery Co and Jiangsu Xinri E Vehicle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Xinri E and Lutian Machinery 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 Lutian Machinery Co are associated (or correlated) with Jiangsu Xinri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Xinri E has no effect on the direction of Lutian Machinery i.e., Lutian Machinery and Jiangsu Xinri go up and down completely randomly.

Pair Corralation between Lutian Machinery and Jiangsu Xinri

Assuming the 90 days trading horizon Lutian Machinery Co is expected to generate 0.9 times more return on investment than Jiangsu Xinri. However, Lutian Machinery Co is 1.12 times less risky than Jiangsu Xinri. It trades about 0.2 of its potential returns per unit of risk. Jiangsu Xinri E Vehicle is currently generating about 0.14 per unit of risk. If you would invest  1,202  in Lutian Machinery Co on September 18, 2024 and sell it today you would earn a total of  370.00  from holding Lutian Machinery Co or generate 30.78% return on investment over 90 days.

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

Lutian Machinery Co  vs.  Jiangsu Xinri E Vehicle

Lutian Machinery

Risk-Adjusted Performance

15 of 100

Good

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

Jiangsu Xinri E

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Xinri E Vehicle are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Xinri sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lutian Machinery and Jiangsu Xinri

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

The idea behind Lutian Machinery Co and Jiangsu Xinri E Vehicle 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.