Correlation Between Shaanxi Construction and Luyin Investment
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By analyzing existing cross correlation between Shaanxi Construction Machinery and Luyin Investment Group, you can compare the effects of market volatilities on Shaanxi Construction and Luyin Investment 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 Shaanxi Construction with a short position of Luyin Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Construction and Luyin Investment.
Diversification Opportunities for Shaanxi Construction and Luyin Investment
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shaanxi and Luyin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Construction Machinery and Luyin Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luyin Investment and Shaanxi 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 Shaanxi Construction Machinery are associated (or correlated) with Luyin Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luyin Investment has no effect on the direction of Shaanxi Construction i.e., Shaanxi Construction and Luyin Investment go up and down completely randomly.
Pair Corralation between Shaanxi Construction and Luyin Investment
Assuming the 90 days trading horizon Shaanxi Construction Machinery is expected to under-perform the Luyin Investment. In addition to that, Shaanxi Construction is 1.85 times more volatile than Luyin Investment Group. It trades about -0.41 of its total potential returns per unit of risk. Luyin Investment Group is currently generating about -0.44 per unit of volatility. If you would invest 646.00 in Luyin Investment Group on October 14, 2024 and sell it today you would lose (95.00) from holding Luyin Investment Group or give up 14.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shaanxi Construction Machinery vs. Luyin Investment Group
Performance |
| Timeline |
| Shaanxi Construction |
| Luyin Investment |
Shaanxi Construction and Luyin Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shaanxi Construction and Luyin Investment
The main advantage of trading using opposite Shaanxi Construction and Luyin Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shaanxi Construction position performs unexpectedly, Luyin Investment 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 Luyin Investment will offset losses from the drop in Luyin Investment's long position.The idea behind Shaanxi Construction Machinery and Luyin Investment Group 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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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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