Correlation Between Huaneng Lancang and China Longyuan
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By analyzing existing cross correlation between Huaneng Lancang River and China Longyuan Power, you can compare the effects of market volatilities on Huaneng Lancang and China Longyuan 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 Huaneng Lancang with a short position of China Longyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaneng Lancang and China Longyuan.
Diversification Opportunities for Huaneng Lancang and China Longyuan
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Huaneng and China is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Huaneng Lancang River and China Longyuan Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Longyuan Power and Huaneng Lancang 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 Huaneng Lancang River are associated (or correlated) with China Longyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Longyuan Power has no effect on the direction of Huaneng Lancang i.e., Huaneng Lancang and China Longyuan go up and down completely randomly.
Pair Corralation between Huaneng Lancang and China Longyuan
Assuming the 90 days trading horizon Huaneng Lancang River is expected to under-perform the China Longyuan. But the stock apears to be less risky and, when comparing its historical volatility, Huaneng Lancang River is 1.12 times less risky than China Longyuan. The stock trades about -0.11 of its potential returns per unit of risk. The China Longyuan Power is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,489 in China Longyuan Power on November 7, 2024 and sell it today you would earn a total of 11.00 from holding China Longyuan Power or generate 0.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Huaneng Lancang River vs. China Longyuan Power
Performance |
| Timeline |
| Huaneng Lancang River |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| China Longyuan Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Huaneng Lancang and China Longyuan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Huaneng Lancang and China Longyuan
The main advantage of trading using opposite Huaneng Lancang and China Longyuan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huaneng Lancang position performs unexpectedly, China Longyuan 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 China Longyuan will offset losses from the drop in China Longyuan's long position.The idea behind Huaneng Lancang River and China Longyuan 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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