Correlation Between Reward Wool and Li Peng
Can any of the company-specific risk be diversified away by investing in both Reward Wool and Li Peng 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 Reward Wool and Li Peng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reward Wool Industry and Li Peng Enterprise, you can compare the effects of market volatilities on Reward Wool and Li Peng 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 Reward Wool with a short position of Li Peng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reward Wool and Li Peng.
Diversification Opportunities for Reward Wool and Li Peng
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Reward and 1447 is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Reward Wool Industry and Li Peng Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Peng Enterprise and Reward Wool 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 Reward Wool Industry are associated (or correlated) with Li Peng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Peng Enterprise has no effect on the direction of Reward Wool i.e., Reward Wool and Li Peng go up and down completely randomly.
Pair Corralation between Reward Wool and Li Peng
Assuming the 90 days trading horizon Reward Wool Industry is expected to generate 1.18 times more return on investment than Li Peng. However, Reward Wool is 1.18 times more volatile than Li Peng Enterprise. It trades about 0.07 of its potential returns per unit of risk. Li Peng Enterprise is currently generating about 0.0 per unit of risk. If you would invest 2,340 in Reward Wool Industry on September 1, 2024 and sell it today you would earn a total of 1,345 from holding Reward Wool Industry or generate 57.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reward Wool Industry vs. Li Peng Enterprise
Performance |
| Timeline |
| Reward Wool Industry |
| Li Peng Enterprise |
Reward Wool and Li Peng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reward Wool and Li Peng
The main advantage of trading using opposite Reward Wool and Li Peng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reward Wool position performs unexpectedly, Li Peng 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 Li Peng will offset losses from the drop in Li Peng's long position.| Reward Wool vs. Tung Ho Textile | Reward Wool vs. Carnival Industrial Corp | Reward Wool vs. Yi Jinn Industrial | Reward Wool vs. Tah Tong Textile |
| Li Peng vs. GeneFerm Biotechnology Co | Li Peng vs. Tang Eng Iron | Li Peng vs. GeneReach Biotechnology | Li Peng vs. Tung Ho Steel |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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