Correlation Between Prosperity Dielectrics and Liton Technology
Can any of the company-specific risk be diversified away by investing in both Prosperity Dielectrics and Liton Technology 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 Prosperity Dielectrics and Liton Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Dielectrics Co and Liton Technology, you can compare the effects of market volatilities on Prosperity Dielectrics and Liton 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 Prosperity Dielectrics with a short position of Liton Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Dielectrics and Liton Technology.
Diversification Opportunities for Prosperity Dielectrics and Liton Technology
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Prosperity and Liton is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Dielectrics Co and Liton Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liton Technology and Prosperity Dielectrics 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 Prosperity Dielectrics Co are associated (or correlated) with Liton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liton Technology has no effect on the direction of Prosperity Dielectrics i.e., Prosperity Dielectrics and Liton Technology go up and down completely randomly.
Pair Corralation between Prosperity Dielectrics and Liton Technology
Assuming the 90 days trading horizon Prosperity Dielectrics Co is expected to under-perform the Liton Technology. But the stock apears to be less risky and, when comparing its historical volatility, Prosperity Dielectrics Co is 1.0 times less risky than Liton Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Liton Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,540 in Liton Technology on November 5, 2024 and sell it today you would earn a total of 820.00 from holding Liton Technology or generate 23.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosperity Dielectrics Co vs. Liton Technology
Performance |
| Timeline |
| Prosperity Dielectrics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Liton Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Prosperity Dielectrics and Liton Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosperity Dielectrics and Liton Technology
The main advantage of trading using opposite Prosperity Dielectrics and Liton Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Dielectrics position performs unexpectedly, Liton 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 Liton Technology will offset losses from the drop in Liton Technology's long position.The idea behind Prosperity Dielectrics Co and Liton Technology 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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