Correlation Between Loongson Technology and Beijing Scitop
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By analyzing existing cross correlation between Loongson Technology Corp and Beijing Scitop Bio, you can compare the effects of market volatilities on Loongson Technology and Beijing Scitop 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 Loongson Technology with a short position of Beijing Scitop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loongson Technology and Beijing Scitop.
Diversification Opportunities for Loongson Technology and Beijing Scitop
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Loongson and Beijing is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Loongson Technology Corp and Beijing Scitop Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Scitop Bio and Loongson Technology 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 Loongson Technology Corp are associated (or correlated) with Beijing Scitop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Scitop Bio has no effect on the direction of Loongson Technology i.e., Loongson Technology and Beijing Scitop go up and down completely randomly.
Pair Corralation between Loongson Technology and Beijing Scitop
Assuming the 90 days trading horizon Loongson Technology Corp is expected to generate 1.64 times more return on investment than Beijing Scitop. However, Loongson Technology is 1.64 times more volatile than Beijing Scitop Bio. It trades about 0.21 of its potential returns per unit of risk. Beijing Scitop Bio is currently generating about 0.15 per unit of risk. If you would invest 13,762 in Loongson Technology Corp on September 1, 2024 and sell it today you would earn a total of 2,758 from holding Loongson Technology Corp or generate 20.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Loongson Technology Corp vs. Beijing Scitop Bio
Performance |
| Timeline |
| Loongson Technology Corp |
| Beijing Scitop Bio |
Loongson Technology and Beijing Scitop Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loongson Technology and Beijing Scitop
The main advantage of trading using opposite Loongson Technology and Beijing Scitop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loongson Technology position performs unexpectedly, Beijing Scitop 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 Beijing Scitop will offset losses from the drop in Beijing Scitop's long position.The idea behind Loongson Technology Corp and Beijing Scitop Bio 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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