Correlation Between Longwell and Harmony Electronics
Can any of the company-specific risk be diversified away by investing in both Longwell and Harmony Electronics 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 Longwell and Harmony Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Longwell Co and Harmony Electronics, you can compare the effects of market volatilities on Longwell and Harmony Electronics 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 Longwell with a short position of Harmony Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longwell and Harmony Electronics.
Diversification Opportunities for Longwell and Harmony Electronics
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Longwell and Harmony is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Longwell Co and Harmony Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Electronics and Longwell 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 Longwell Co are associated (or correlated) with Harmony Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Electronics has no effect on the direction of Longwell i.e., Longwell and Harmony Electronics go up and down completely randomly.
Pair Corralation between Longwell and Harmony Electronics
Assuming the 90 days trading horizon Longwell Co is expected to generate 1.57 times more return on investment than Harmony Electronics. However, Longwell is 1.57 times more volatile than Harmony Electronics. It trades about 0.04 of its potential returns per unit of risk. Harmony Electronics is currently generating about 0.02 per unit of risk. If you would invest 5,157 in Longwell Co on September 3, 2024 and sell it today you would earn a total of 2,053 from holding Longwell Co or generate 39.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Longwell Co vs. Harmony Electronics
Performance |
| Timeline |
| Longwell |
| Harmony Electronics |
Longwell and Harmony Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Longwell and Harmony Electronics
The main advantage of trading using opposite Longwell and Harmony Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Longwell position performs unexpectedly, Harmony Electronics 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 Harmony Electronics will offset losses from the drop in Harmony Electronics' long position.| Longwell vs. Acbel Polytech | Longwell vs. Primax Electronics | Longwell vs. Flexium Interconnect | Longwell vs. Career Technology MFG |
| Harmony Electronics vs. Integrated Service Technology | Harmony Electronics vs. WiseChip Semiconductor | Harmony Electronics vs. Novatek Microelectronics Corp | Harmony Electronics vs. Leader Electronics |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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