Correlation Between Heilongjiang Transport and Loongson Technology
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By analyzing existing cross correlation between Heilongjiang Transport Development and Loongson Technology Corp, you can compare the effects of market volatilities on Heilongjiang Transport and Loongson Technology 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 Heilongjiang Transport with a short position of Loongson Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heilongjiang Transport and Loongson Technology.
Diversification Opportunities for Heilongjiang Transport and Loongson Technology
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Heilongjiang and Loongson is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Loongson Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loongson Technology Corp and Heilongjiang Transport 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 Heilongjiang Transport Development are associated (or correlated) with Loongson Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loongson Technology Corp has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Loongson Technology go up and down completely randomly.
Pair Corralation between Heilongjiang Transport and Loongson Technology
Assuming the 90 days trading horizon Heilongjiang Transport is expected to generate 2.17 times less return on investment than Loongson Technology. But when comparing it to its historical volatility, Heilongjiang Transport Development is 1.74 times less risky than Loongson Technology. It trades about 0.06 of its potential returns per unit of risk. Loongson Technology Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 9,117 in Loongson Technology Corp on November 2, 2024 and sell it today you would earn a total of 2,571 from holding Loongson Technology Corp or generate 28.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heilongjiang Transport Develop vs. Loongson Technology Corp
Performance |
| Timeline |
| Heilongjiang Transport |
| Loongson Technology Corp |
Heilongjiang Transport and Loongson Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heilongjiang Transport and Loongson Technology
The main advantage of trading using opposite Heilongjiang Transport and Loongson Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heilongjiang Transport position performs unexpectedly, Loongson Technology 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 Loongson Technology will offset losses from the drop in Loongson Technology's long position.The idea behind Heilongjiang Transport Development and Loongson Technology Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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