Correlation Between Asia Cement and Lihtai Construction
Can any of the company-specific risk be diversified away by investing in both Asia Cement and Lihtai Construction 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 Asia Cement and Lihtai Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asia Cement Corp and Lihtai Construction Enterprise, you can compare the effects of market volatilities on Asia Cement and Lihtai Construction 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 Asia Cement with a short position of Lihtai Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Cement and Lihtai Construction.
Diversification Opportunities for Asia Cement and Lihtai Construction
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Asia and Lihtai is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Asia Cement Corp and Lihtai Construction Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lihtai Construction and Asia Cement 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 Asia Cement Corp are associated (or correlated) with Lihtai Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lihtai Construction has no effect on the direction of Asia Cement i.e., Asia Cement and Lihtai Construction go up and down completely randomly.
Pair Corralation between Asia Cement and Lihtai Construction
Assuming the 90 days trading horizon Asia Cement is expected to generate 1.21 times less return on investment than Lihtai Construction. In addition to that, Asia Cement is 1.68 times more volatile than Lihtai Construction Enterprise. It trades about 0.17 of its total potential returns per unit of risk. Lihtai Construction Enterprise is currently generating about 0.34 per unit of volatility. If you would invest 8,230 in Lihtai Construction Enterprise on November 28, 2024 and sell it today you would earn a total of 300.00 from holding Lihtai Construction Enterprise or generate 3.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Asia Cement Corp vs. Lihtai Construction Enterprise
Performance |
| Timeline |
| Asia Cement Corp |
| Lihtai Construction |
Asia Cement and Lihtai Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asia Cement and Lihtai Construction
The main advantage of trading using opposite Asia Cement and Lihtai Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asia Cement position performs unexpectedly, Lihtai Construction 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 Lihtai Construction will offset losses from the drop in Lihtai Construction's long position.| Asia Cement vs. Taiwan Cement Corp | Asia Cement vs. Far Eastern New | Asia Cement vs. Uni President Enterprises Corp | Asia Cement vs. Nan Ya Plastics |
| Lihtai Construction vs. Ruentex Development Co | Lihtai Construction vs. Ruentex Industries | Lihtai Construction vs. Ruentex Engineering Construction | Lihtai Construction vs. Feng Tay Enterprises |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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