Correlation Between Lien Hwa and Taiyen Biotech
Can any of the company-specific risk be diversified away by investing in both Lien Hwa and Taiyen Biotech 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 Taiyen Biotech 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 Taiyen Biotech Co, you can compare the effects of market volatilities on Lien Hwa and Taiyen Biotech 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 Taiyen Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lien Hwa and Taiyen Biotech.
Diversification Opportunities for Lien Hwa and Taiyen Biotech
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lien and Taiyen is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lien Hwa Industrial and Taiyen Biotech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiyen Biotech 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 Taiyen Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiyen Biotech has no effect on the direction of Lien Hwa i.e., Lien Hwa and Taiyen Biotech go up and down completely randomly.
Pair Corralation between Lien Hwa and Taiyen Biotech
Assuming the 90 days trading horizon Lien Hwa Industrial is expected to generate 1.23 times more return on investment than Taiyen Biotech. However, Lien Hwa is 1.23 times more volatile than Taiyen Biotech Co. It trades about 0.02 of its potential returns per unit of risk. Taiyen Biotech Co is currently generating about 0.0 per unit of risk. If you would invest 5,397 in Lien Hwa Industrial on September 1, 2024 and sell it today you would earn a total of 463.00 from holding Lien Hwa Industrial or generate 8.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.55% |
| Values | Daily Returns |
Lien Hwa Industrial vs. Taiyen Biotech Co
Performance |
| Timeline |
| Lien Hwa Industrial |
| Taiyen Biotech |
Lien Hwa and Taiyen Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lien Hwa and Taiyen Biotech
The main advantage of trading using opposite Lien Hwa and Taiyen Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lien Hwa position performs unexpectedly, Taiyen Biotech 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 Taiyen Biotech will offset losses from the drop in Taiyen Biotech'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 |
| Taiyen Biotech vs. De Licacy Industrial | Taiyen Biotech vs. Wisher Industrial Co | Taiyen Biotech vs. Tainan Enterprises Co |
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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