Correlation Between Lien Hwa and Uni President
Can any of the company-specific risk be diversified away by investing in both Lien Hwa and Uni President 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 Lien Hwa and Uni President into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lien Hwa Industrial and Uni President Enterprises Corp, you can compare the effects of market volatilities on Lien Hwa and Uni President 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 Lien Hwa with a short position of Uni President. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lien Hwa and Uni President.
Diversification Opportunities for Lien Hwa and Uni President
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lien and Uni is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Lien Hwa Industrial and Uni President Enterprises Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uni President Enterp and Lien Hwa 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 Lien Hwa Industrial are associated (or correlated) with Uni President. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uni President Enterp has no effect on the direction of Lien Hwa i.e., Lien Hwa and Uni President go up and down completely randomly.
Pair Corralation between Lien Hwa and Uni President
Assuming the 90 days trading horizon Lien Hwa Industrial is expected to under-perform the Uni President. But the stock apears to be less risky and, when comparing its historical volatility, Lien Hwa Industrial is 1.06 times less risky than Uni President. The stock trades about -0.19 of its potential returns per unit of risk. The Uni President Enterprises Corp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 8,850 in Uni President Enterprises Corp on October 22, 2024 and sell it today you would lose (1,000.00) from holding Uni President Enterprises Corp or give up 11.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lien Hwa Industrial vs. Uni President Enterprises Corp
Performance |
| Timeline |
| Lien Hwa Industrial |
| Uni President Enterp |
Lien Hwa and Uni President Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lien Hwa and Uni President
The main advantage of trading using opposite Lien Hwa and Uni President positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lien Hwa position performs unexpectedly, Uni President 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 Uni President will offset losses from the drop in Uni President's long position.| Lien Hwa vs. Great Wall Enterprise | Lien Hwa vs. Lian Hwa Foods | Lien Hwa vs. Charoen Pokphand Enterprise | Lien Hwa vs. Uni President Enterprises Corp |
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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 the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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