Correlation Between U Tech and Li Peng
Can any of the company-specific risk be diversified away by investing in both U Tech 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 U Tech and Li Peng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between U Tech Media Corp and Li Peng Enterprise, you can compare the effects of market volatilities on U Tech 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 U Tech with a short position of Li Peng. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Tech and Li Peng.
Diversification Opportunities for U Tech and Li Peng
Very poor diversification
The 3 months correlation between 3050 and 1447 is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding U Tech Media Corp 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 U Tech 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 U Tech Media Corp 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 U Tech i.e., U Tech and Li Peng go up and down completely randomly.
Pair Corralation between U Tech and Li Peng
Assuming the 90 days trading horizon U Tech Media Corp is expected to under-perform the Li Peng. In addition to that, U Tech is 1.66 times more volatile than Li Peng Enterprise. It trades about -0.16 of its total potential returns per unit of risk. Li Peng Enterprise is currently generating about 0.04 per unit of volatility. If you would invest 707.00 in Li Peng Enterprise on November 2, 2024 and sell it today you would earn a total of 5.00 from holding Li Peng Enterprise or generate 0.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Tech Media Corp vs. Li Peng Enterprise
Performance |
| Timeline |
| U Tech Media |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Li Peng Enterprise |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
U Tech and Li Peng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Tech and Li Peng
The main advantage of trading using opposite U Tech and Li Peng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Tech 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.The idea behind U Tech Media Corp and Li Peng Enterprise 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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