Correlation Between YuantaP Shares and Lian Hwa
Can any of the company-specific risk be diversified away by investing in both YuantaP Shares and Lian Hwa 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 YuantaP Shares and Lian Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between YuantaP shares Taiwan Electronics and Lian Hwa Foods, you can compare the effects of market volatilities on YuantaP Shares and Lian Hwa 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 YuantaP Shares with a short position of Lian Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of YuantaP Shares and Lian Hwa.
Diversification Opportunities for YuantaP Shares and Lian Hwa
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between YuantaP and Lian is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares Taiwan Electron and Lian Hwa Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lian Hwa Foods and YuantaP Shares 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 YuantaP shares Taiwan Electronics are associated (or correlated) with Lian Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lian Hwa Foods has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and Lian Hwa go up and down completely randomly.
Pair Corralation between YuantaP Shares and Lian Hwa
Assuming the 90 days trading horizon YuantaP shares Taiwan Electronics is expected to under-perform the Lian Hwa. In addition to that, YuantaP Shares is 1.25 times more volatile than Lian Hwa Foods. It trades about -0.02 of its total potential returns per unit of risk. Lian Hwa Foods is currently generating about 0.21 per unit of volatility. If you would invest 10,850 in Lian Hwa Foods on August 28, 2024 and sell it today you would earn a total of 1,000.00 from holding Lian Hwa Foods or generate 9.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
YuantaP shares Taiwan Electron vs. Lian Hwa Foods
Performance |
| Timeline |
| YuantaP shares Taiwan |
| Lian Hwa Foods |
YuantaP Shares and Lian Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with YuantaP Shares and Lian Hwa
The main advantage of trading using opposite YuantaP Shares and Lian Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YuantaP Shares position performs unexpectedly, Lian Hwa 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 Lian Hwa will offset losses from the drop in Lian Hwa's long position.The idea behind YuantaP shares Taiwan Electronics and Lian Hwa Foods 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.| Lian Hwa vs. Lien Hwa Industrial | Lian Hwa vs. Charoen Pokphand Enterprise | Lian Hwa vs. Great Wall Enterprise | Lian Hwa vs. Uni President Enterprises 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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