Correlation Between Great China and Louisa Professional
Can any of the company-specific risk be diversified away by investing in both Great China and Louisa Professional 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 Great China and Louisa Professional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great China Metal and Louisa Professional Coffee, you can compare the effects of market volatilities on Great China and Louisa Professional 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 Great China with a short position of Louisa Professional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great China and Louisa Professional.
Diversification Opportunities for Great China and Louisa Professional
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Great and Louisa is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Great China Metal and Louisa Professional Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Louisa Professional and Great China 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 Great China Metal are associated (or correlated) with Louisa Professional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Louisa Professional has no effect on the direction of Great China i.e., Great China and Louisa Professional go up and down completely randomly.
Pair Corralation between Great China and Louisa Professional
Assuming the 90 days trading horizon Great China Metal is expected to generate 0.4 times more return on investment than Louisa Professional. However, Great China Metal is 2.48 times less risky than Louisa Professional. It trades about 0.0 of its potential returns per unit of risk. Louisa Professional Coffee is currently generating about -0.43 per unit of risk. If you would invest 2,290 in Great China Metal on September 1, 2024 and sell it today you would earn a total of 0.00 from holding Great China Metal or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great China Metal vs. Louisa Professional Coffee
Performance |
| Timeline |
| Great China Metal |
| Louisa Professional |
Great China and Louisa Professional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great China and Louisa Professional
The main advantage of trading using opposite Great China and Louisa Professional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great China position performs unexpectedly, Louisa Professional 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 Louisa Professional will offset losses from the drop in Louisa Professional's long position.| Great China vs. Basso Industry Corp | Great China vs. Chung Hsin Electric Machinery | Great China vs. TYC Brother Industrial | Great China vs. TECO Electric Machinery |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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