Correlation Between Ludan Engineering and Golan Plastic

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

By analyzing existing cross correlation between Ludan Engineering Co and Golan Plastic, you can compare the effects of market volatilities on Ludan Engineering and Golan Plastic 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 Ludan Engineering with a short position of Golan Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ludan Engineering and Golan Plastic.

Diversification Opportunities for Ludan Engineering and Golan Plastic

0.93

Correlation Coefficient

Ludan Engineering  Golan Plastic

Almost no diversification

The 3 months correlation between Ludan and Golan is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ludan Engineering Co and Golan Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golan Plastic and Ludan Engineering 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 Ludan Engineering Co are associated (or correlated) with Golan Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golan Plastic has no effect on the direction of Ludan Engineering i.e., Ludan Engineering and Golan Plastic go up and down completely randomly.

Pair Corralation between Ludan Engineering and Golan Plastic

Assuming the 90 days trading horizon Ludan Engineering is expected to generate 1.1 times less return on investment than Golan Plastic. But when comparing it to its historical volatility, Ludan Engineering Co is 1.48 times less risky than Golan Plastic. It trades about 0.44 of its potential returns per unit of risk. Golan Plastic is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  93,900  in Golan Plastic on September 16, 2024 and sell it today you would earn a total of  42,700  from holding Golan Plastic or generate 45.47% return on investment over 90 days.

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

Ludan Engineering Co  vs.  Golan Plastic

Ludan Engineering

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Ludan Engineering Co are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ludan Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Golan Plastic

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Golan Plastic are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Golan Plastic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ludan Engineering and Golan Plastic

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

The idea behind Ludan Engineering Co and Golan Plastic 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.