Correlation Between Walton Advanced and Lingsen Precision

Can any of the company-specific risk be diversified away by investing in both Walton Advanced and Lingsen Precision 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 Walton Advanced and Lingsen Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walton Advanced Engineering and Lingsen Precision Industries, you can compare the effects of market volatilities on Walton Advanced and Lingsen Precision 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 Walton Advanced with a short position of Lingsen Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walton Advanced and Lingsen Precision.

Diversification Opportunities for Walton Advanced and Lingsen Precision

0.66

Correlation Coefficient

Walton Advanced  Lingsen Precision

Poor diversification

The 3 months correlation between Walton and Lingsen is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walton Advanced Engineering and Lingsen Precision Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lingsen Precision and Walton Advanced 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 Walton Advanced Engineering are associated (or correlated) with Lingsen Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lingsen Precision has no effect on the direction of Walton Advanced i.e., Walton Advanced and Lingsen Precision go up and down completely randomly.

Pair Corralation between Walton Advanced and Lingsen Precision

Assuming the 90 days trading horizon Walton Advanced Engineering is expected to under-perform the Lingsen Precision. But the stock apears to be less risky and, when comparing its historical volatility, Walton Advanced Engineering is 1.39 times less risky than Lingsen Precision. The stock trades about -0.18 of its potential returns per unit of risk. The Lingsen Precision Industries is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,905  in Lingsen Precision Industries on September 23, 2024 and sell it today you would lose (190.00) from holding Lingsen Precision Industries or give up 9.97% of portfolio value over 90 days.

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

Walton Advanced Engineering  vs.  Lingsen Precision Industries

Walton Advanced Engi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walton Advanced Engineering 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.

Lingsen Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lingsen Precision Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Walton Advanced and Lingsen Precision

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

The idea behind Walton Advanced Engineering and Lingsen Precision Industries 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.