Correlation Between Lutian Machinery and Impulse Qingdao

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

Diversification Opportunities for Lutian Machinery and Impulse Qingdao

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Lutian and Impulse is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Lutian Machinery Co and Impulse Qingdao Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impulse Qingdao Health and Lutian Machinery 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 Lutian Machinery Co are associated (or correlated) with Impulse Qingdao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impulse Qingdao Health has no effect on the direction of Lutian Machinery i.e., Lutian Machinery and Impulse Qingdao go up and down completely randomly.

Pair Corralation between Lutian Machinery and Impulse Qingdao

Assuming the 90 days trading horizon Lutian Machinery is expected to generate 1.42 times less return on investment than Impulse Qingdao. But when comparing it to its historical volatility, Lutian Machinery Co is 2.24 times less risky than Impulse Qingdao. It trades about 0.09 of its potential returns per unit of risk. Impulse Qingdao Health is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,119  in Impulse Qingdao Health on September 13, 2024 and sell it today you would earn a total of  73.00  from holding Impulse Qingdao Health or generate 3.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Lutian Machinery Co  vs.  Impulse Qingdao Health

 Performance 
       Timeline  
Lutian Machinery 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Lutian Machinery Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lutian Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.
Impulse Qingdao Health 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Impulse Qingdao Health are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Impulse Qingdao sustained solid returns over the last few months and may actually be approaching a breakup point.

Lutian Machinery and Impulse Qingdao Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lutian Machinery and Impulse Qingdao

The main advantage of trading using opposite Lutian Machinery and Impulse Qingdao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lutian Machinery position performs unexpectedly, Impulse Qingdao 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 Impulse Qingdao will offset losses from the drop in Impulse Qingdao's long position.
The idea behind Lutian Machinery Co and Impulse Qingdao Health 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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