Correlation Between Luk Fook and AllovirInc

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Can any of the company-specific risk be diversified away by investing in both Luk Fook and AllovirInc 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 Luk Fook and AllovirInc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Luk Fook Holdings and AllovirInc, you can compare the effects of market volatilities on Luk Fook and AllovirInc 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 Luk Fook with a short position of AllovirInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luk Fook and AllovirInc.

Diversification Opportunities for Luk Fook and AllovirInc

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between LKFLF and AllovirInc is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Luk Fook Holdings and AllovirInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AllovirInc and Luk Fook 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 Luk Fook Holdings are associated (or correlated) with AllovirInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AllovirInc has no effect on the direction of Luk Fook i.e., Luk Fook and AllovirInc go up and down completely randomly.

Pair Corralation between Luk Fook and AllovirInc

Assuming the 90 days horizon Luk Fook Holdings is expected to under-perform the AllovirInc. But the pink sheet apears to be less risky and, when comparing its historical volatility, Luk Fook Holdings is 3.58 times less risky than AllovirInc. The pink sheet trades about -0.27 of its potential returns per unit of risk. The AllovirInc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  704.00  in AllovirInc on September 10, 2022 and sell it today you would earn a total of  20.00  from holding AllovirInc or generate 2.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Luk Fook Holdings  vs.  AllovirInc

 Performance (%) 
       Timeline  
Luk Fook Holdings 
LKFLF Performance
0 of 100
Over the last 90 days Luk Fook Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

LKFLF Price Channel

AllovirInc 
AllovirInc Performance
0 of 100
Over the last 90 days AllovirInc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

AllovirInc Price Channel

Luk Fook and AllovirInc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Luk Fook and AllovirInc

The main advantage of trading using opposite Luk Fook and AllovirInc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luk Fook position performs unexpectedly, AllovirInc 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 AllovirInc will offset losses from the drop in AllovirInc's long position.
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The idea behind Luk Fook Holdings and AllovirInc 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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