Correlation Between Science Applications and Longfor Group
Can any of the company-specific risk be diversified away by investing in both Science Applications and Longfor Group 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 Science Applications and Longfor Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Science Applications International and Longfor Group Holdings, you can compare the effects of market volatilities on Science Applications and Longfor Group 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 Science Applications with a short position of Longfor Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Applications and Longfor Group.
Diversification Opportunities for Science Applications and Longfor Group
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Science and Longfor is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and Longfor Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longfor Group Holdings and Science Applications 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 Science Applications International are associated (or correlated) with Longfor Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longfor Group Holdings has no effect on the direction of Science Applications i.e., Science Applications and Longfor Group go up and down completely randomly.
Pair Corralation between Science Applications and Longfor Group
Assuming the 90 days trading horizon Science Applications is expected to generate 4.34 times less return on investment than Longfor Group. But when comparing it to its historical volatility, Science Applications International is 3.18 times less risky than Longfor Group. It trades about 0.04 of its potential returns per unit of risk. Longfor Group Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 81.00 in Longfor Group Holdings on August 25, 2024 and sell it today you would earn a total of 52.00 from holding Longfor Group Holdings or generate 64.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.64% |
| Values | Daily Returns |
Science Applications Internati vs. Longfor Group Holdings
Performance |
| Timeline |
| Science Applications |
| Longfor Group Holdings |
Science Applications and Longfor Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Science Applications and Longfor Group
The main advantage of trading using opposite Science Applications and Longfor Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications position performs unexpectedly, Longfor Group 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 Longfor Group will offset losses from the drop in Longfor Group's long position.| Science Applications vs. Apple Inc | Science Applications vs. Apple Inc | Science Applications vs. Apple Inc | Science Applications vs. Apple Inc |
| Longfor Group vs. G8 EDUCATION | Longfor Group vs. Hyrican Informationssysteme Aktiengesellschaft | Longfor Group vs. Science Applications International | Longfor Group vs. Datadog |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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