Correlation Between Leyard Optoelectronic and PKU HealthCare

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

Diversification Opportunities for Leyard Optoelectronic and PKU HealthCare

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Leyard and PKU is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Leyard Optoelectronic and PKU HealthCare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKU HealthCare Corp and Leyard Optoelectronic 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 Leyard Optoelectronic are associated (or correlated) with PKU HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKU HealthCare Corp has no effect on the direction of Leyard Optoelectronic i.e., Leyard Optoelectronic and PKU HealthCare go up and down completely randomly.

Pair Corralation between Leyard Optoelectronic and PKU HealthCare

Assuming the 90 days trading horizon Leyard Optoelectronic is expected to generate 1.36 times less return on investment than PKU HealthCare. In addition to that, Leyard Optoelectronic is 1.26 times more volatile than PKU HealthCare Corp. It trades about 0.04 of its total potential returns per unit of risk. PKU HealthCare Corp is currently generating about 0.07 per unit of volatility. If you would invest  413.00  in PKU HealthCare Corp on November 3, 2024 and sell it today you would earn a total of  174.00  from holding PKU HealthCare Corp or generate 42.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Leyard Optoelectronic  vs.  PKU HealthCare Corp

 Performance 
       Timeline  
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.
PKU HealthCare Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PKU HealthCare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PKU HealthCare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Leyard Optoelectronic and PKU HealthCare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Leyard Optoelectronic and PKU HealthCare

The main advantage of trading using opposite Leyard Optoelectronic and PKU HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leyard Optoelectronic position performs unexpectedly, PKU HealthCare 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 PKU HealthCare will offset losses from the drop in PKU HealthCare's long position.
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The idea behind Leyard Optoelectronic and PKU HealthCare Corp 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.

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