Correlation Between Lowes Companies and CHINA HUARONG
Can any of the company-specific risk be diversified away by investing in both Lowes Companies and CHINA HUARONG 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 Lowes Companies and CHINA HUARONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on Lowes Companies and CHINA HUARONG 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 Lowes Companies with a short position of CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and CHINA HUARONG.
Diversification Opportunities for Lowes Companies and CHINA HUARONG
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lowes and CHINA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD and Lowes Companies 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 Lowes Companies are associated (or correlated) with CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of Lowes Companies i.e., Lowes Companies and CHINA HUARONG go up and down completely randomly.
Pair Corralation between Lowes Companies and CHINA HUARONG
Assuming the 90 days horizon Lowes Companies is expected to generate 65.8 times less return on investment than CHINA HUARONG. But when comparing it to its historical volatility, Lowes Companies is 26.83 times less risky than CHINA HUARONG. It trades about 0.06 of its potential returns per unit of risk. CHINA HUARONG ENERHD 50 is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 0.05 in CHINA HUARONG ENERHD 50 on September 1, 2024 and sell it today you would earn a total of 0.10 from holding CHINA HUARONG ENERHD 50 or generate 200.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. CHINA HUARONG ENERHD 50
Performance |
| Timeline |
| Lowes Companies |
| CHINA HUARONG ENERHD |
Lowes Companies and CHINA HUARONG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and CHINA HUARONG
The main advantage of trading using opposite Lowes Companies and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies position performs unexpectedly, CHINA HUARONG 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 CHINA HUARONG will offset losses from the drop in CHINA HUARONG's long position.| Lowes Companies vs. EVS Broadcast Equipment | Lowes Companies vs. Air Transport Services | Lowes Companies vs. SIEM OFFSHORE NEW | Lowes Companies vs. TEXAS ROADHOUSE |
| CHINA HUARONG vs. United Breweries Co | CHINA HUARONG vs. Monster Beverage Corp | CHINA HUARONG vs. LIFEWAY FOODS | CHINA HUARONG vs. National Beverage Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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