Correlation Between Hangzhou Weiguang and Leyard Optoelectronic

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Can any of the company-specific risk be diversified away by investing in both Hangzhou Weiguang and Leyard Optoelectronic 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 Hangzhou Weiguang and Leyard Optoelectronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hangzhou Weiguang Electronic and Leyard Optoelectronic, you can compare the effects of market volatilities on Hangzhou Weiguang and Leyard Optoelectronic 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 Hangzhou Weiguang with a short position of Leyard Optoelectronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hangzhou Weiguang and Leyard Optoelectronic.

Diversification Opportunities for Hangzhou Weiguang and Leyard Optoelectronic

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hangzhou and Leyard is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Weiguang Electronic and Leyard Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leyard Optoelectronic and Hangzhou Weiguang 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 Hangzhou Weiguang Electronic are associated (or correlated) with Leyard Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leyard Optoelectronic has no effect on the direction of Hangzhou Weiguang i.e., Hangzhou Weiguang and Leyard Optoelectronic go up and down completely randomly.

Pair Corralation between Hangzhou Weiguang and Leyard Optoelectronic

Assuming the 90 days trading horizon Hangzhou Weiguang Electronic is expected to generate 0.62 times more return on investment than Leyard Optoelectronic. However, Hangzhou Weiguang Electronic is 1.61 times less risky than Leyard Optoelectronic. It trades about 0.07 of its potential returns per unit of risk. Leyard Optoelectronic is currently generating about -0.18 per unit of risk. If you would invest  2,435  in Hangzhou Weiguang Electronic on October 22, 2024 and sell it today you would earn a total of  71.00  from holding Hangzhou Weiguang Electronic or generate 2.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Hangzhou Weiguang Electronic  vs.  Leyard Optoelectronic

 Performance 
       Timeline  
Hangzhou Weiguang 

Risk-Adjusted Performance

10 of 100

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

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Leyard Optoelectronic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Leyard Optoelectronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Hangzhou Weiguang and Leyard Optoelectronic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hangzhou Weiguang and Leyard Optoelectronic

The main advantage of trading using opposite Hangzhou Weiguang and Leyard Optoelectronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hangzhou Weiguang position performs unexpectedly, Leyard Optoelectronic 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 Leyard Optoelectronic will offset losses from the drop in Leyard Optoelectronic's long position.
The idea behind Hangzhou Weiguang Electronic and Leyard Optoelectronic 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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