Correlation Between Lihtai Construction and Century Wind
Can any of the company-specific risk be diversified away by investing in both Lihtai Construction and Century Wind 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 Lihtai Construction and Century Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lihtai Construction Enterprise and Century Wind Power, you can compare the effects of market volatilities on Lihtai Construction and Century Wind 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 Lihtai Construction with a short position of Century Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lihtai Construction and Century Wind.
Diversification Opportunities for Lihtai Construction and Century Wind
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lihtai and Century is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lihtai Construction Enterprise and Century Wind Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Wind Power and Lihtai Construction 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 Lihtai Construction Enterprise are associated (or correlated) with Century Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Wind Power has no effect on the direction of Lihtai Construction i.e., Lihtai Construction and Century Wind go up and down completely randomly.
Pair Corralation between Lihtai Construction and Century Wind
Assuming the 90 days trading horizon Lihtai Construction Enterprise is expected to generate 0.09 times more return on investment than Century Wind. However, Lihtai Construction Enterprise is 10.94 times less risky than Century Wind. It trades about 0.14 of its potential returns per unit of risk. Century Wind Power is currently generating about -0.01 per unit of risk. If you would invest 8,180 in Lihtai Construction Enterprise on November 7, 2024 and sell it today you would earn a total of 70.00 from holding Lihtai Construction Enterprise or generate 0.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lihtai Construction Enterprise vs. Century Wind Power
Performance |
| Timeline |
| Lihtai Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Century Wind Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Lihtai Construction and Century Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lihtai Construction and Century Wind
The main advantage of trading using opposite Lihtai Construction and Century Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lihtai Construction position performs unexpectedly, Century Wind 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 Century Wind will offset losses from the drop in Century Wind's long position.The idea behind Lihtai Construction Enterprise and Century Wind Power 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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