Correlation Between Chongqing Machinery and LendingClub

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

By analyzing existing cross correlation between Chongqing Machinery Electric and LendingClub, you can compare the effects of market volatilities on Chongqing Machinery and LendingClub 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 Chongqing Machinery with a short position of LendingClub. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and LendingClub.

Diversification Opportunities for Chongqing Machinery and LendingClub

0.63

Correlation Coefficient

Chongqing Machinery  LendingClub

Poor diversification

The 3 months correlation between Chongqing and LendingClub is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and LendingClub in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LendingClub and Chongqing 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 Chongqing Machinery Electric are associated (or correlated) with LendingClub. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LendingClub has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and LendingClub go up and down completely randomly.

Pair Corralation between Chongqing Machinery and LendingClub

Assuming the 90 days horizon Chongqing Machinery is expected to generate 2.09 times less return on investment than LendingClub. In addition to that, Chongqing Machinery is 1.22 times more volatile than LendingClub. It trades about 0.05 of its total potential returns per unit of risk. LendingClub is currently generating about 0.13 per unit of volatility. If you would invest  504.00  in LendingClub on September 14, 2024 and sell it today you would earn a total of  974.00  from holding LendingClub or generate 193.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.64%
Values	Daily Returns

Chongqing Machinery Electric  vs.  LendingClub

Chongqing Machinery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chongqing Machinery reported solid returns over the last few months and may actually be approaching a breakup point.

LendingClub

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LendingClub are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, LendingClub reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chongqing Machinery and LendingClub

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

The idea behind Chongqing Machinery Electric and LendingClub 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.