Correlation Between Luyin Investment and Guocheng Mining

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

Diversification Opportunities for Luyin Investment and Guocheng Mining

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Luyin and Guocheng is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Luyin Investment Group and Guocheng Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guocheng Mining and Luyin Investment 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 Luyin Investment Group are associated (or correlated) with Guocheng Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guocheng Mining has no effect on the direction of Luyin Investment i.e., Luyin Investment and Guocheng Mining go up and down completely randomly.

Pair Corralation between Luyin Investment and Guocheng Mining

Assuming the 90 days trading horizon Luyin Investment Group is expected to generate 0.52 times more return on investment than Guocheng Mining. However, Luyin Investment Group is 1.92 times less risky than Guocheng Mining. It trades about -0.39 of its potential returns per unit of risk. Guocheng Mining Co is currently generating about -0.42 per unit of risk. If you would invest  648.00  in Luyin Investment Group on October 17, 2024 and sell it today you would lose (91.00) from holding Luyin Investment Group or give up 14.04% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Luyin Investment Group  vs.  Guocheng Mining Co

 Performance 
       Timeline  
Luyin Investment 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Luyin Investment Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Luyin Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Guocheng Mining 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Guocheng Mining Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guocheng Mining may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Luyin Investment and Guocheng Mining Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Luyin Investment and Guocheng Mining

The main advantage of trading using opposite Luyin Investment and Guocheng Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luyin Investment position performs unexpectedly, Guocheng Mining 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 Guocheng Mining will offset losses from the drop in Guocheng Mining's long position.
The idea behind Luyin Investment Group and Guocheng Mining Co 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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