Correlation Between Lepu Medical and Guangzhou Dongfang
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By analyzing existing cross correlation between Lepu Medical Tech and Guangzhou Dongfang Hotel, you can compare the effects of market volatilities on Lepu Medical and Guangzhou Dongfang 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 Lepu Medical with a short position of Guangzhou Dongfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lepu Medical and Guangzhou Dongfang.
Diversification Opportunities for Lepu Medical and Guangzhou Dongfang
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lepu and Guangzhou is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lepu Medical Tech and Guangzhou Dongfang Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Dongfang Hotel and Lepu Medical 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 Lepu Medical Tech are associated (or correlated) with Guangzhou Dongfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Dongfang Hotel has no effect on the direction of Lepu Medical i.e., Lepu Medical and Guangzhou Dongfang go up and down completely randomly.
Pair Corralation between Lepu Medical and Guangzhou Dongfang
Assuming the 90 days trading horizon Lepu Medical Tech is expected to under-perform the Guangzhou Dongfang. But the stock apears to be less risky and, when comparing its historical volatility, Lepu Medical Tech is 1.08 times less risky than Guangzhou Dongfang. The stock trades about -0.03 of its potential returns per unit of risk. The Guangzhou Dongfang Hotel is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 718.00 in Guangzhou Dongfang Hotel on November 8, 2024 and sell it today you would earn a total of 232.00 from holding Guangzhou Dongfang Hotel or generate 32.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.57% |
| Values | Daily Returns |
Lepu Medical Tech vs. Guangzhou Dongfang Hotel
Performance |
| Timeline |
| Lepu Medical Tech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Guangzhou Dongfang Hotel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Lepu Medical and Guangzhou Dongfang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lepu Medical and Guangzhou Dongfang
The main advantage of trading using opposite Lepu Medical and Guangzhou Dongfang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lepu Medical position performs unexpectedly, Guangzhou Dongfang 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 Guangzhou Dongfang will offset losses from the drop in Guangzhou Dongfang's long position.The idea behind Lepu Medical Tech and Guangzhou Dongfang Hotel 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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