Correlation Between LEONS FURNITURE and China Overseas

Can any of the company-specific risk be diversified away by investing in both LEONS FURNITURE and China Overseas 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 LEONS FURNITURE and China Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LEONS FURNITURE and China Overseas Land, you can compare the effects of market volatilities on LEONS FURNITURE and China Overseas 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 LEONS FURNITURE with a short position of China Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEONS FURNITURE and China Overseas.

Diversification Opportunities for LEONS FURNITURE and China Overseas

0.38

Correlation Coefficient

LEONS FURNITURE  China Overseas

Weak diversification

The 3 months correlation between LEONS and China is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding LEONS FURNITURE and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and LEONS FURNITURE 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 LEONS FURNITURE are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of LEONS FURNITURE i.e., LEONS FURNITURE and China Overseas go up and down completely randomly.

Pair Corralation between LEONS FURNITURE and China Overseas

Assuming the 90 days horizon LEONS FURNITURE is expected to generate 1.7 times less return on investment than China Overseas. But when comparing it to its historical volatility, LEONS FURNITURE is 1.08 times less risky than China Overseas. It trades about 0.05 of its potential returns per unit of risk. China Overseas Land is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  140.00  in China Overseas Land on May 27, 2025 and sell it today you would earn a total of  14.00  from holding China Overseas Land or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

LEONS FURNITURE  vs.  China Overseas Land

LEONS FURNITURE

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in LEONS FURNITURE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LEONS FURNITURE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China Overseas Land

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Overseas may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with LEONS FURNITURE and China Overseas

The main advantage of trading using opposite LEONS FURNITURE and China Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEONS FURNITURE position performs unexpectedly, China Overseas 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 Overseas will offset losses from the drop in China Overseas' long position.

The idea behind LEONS FURNITURE and China Overseas Land 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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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.