Correlation Between Lien Hwa and Wistron Corp
Can any of the company-specific risk be diversified away by investing in both Lien Hwa and Wistron Corp 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 Wistron Corp 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 Wistron Corp, you can compare the effects of market volatilities on Lien Hwa and Wistron Corp 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 Wistron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lien Hwa and Wistron Corp.
Diversification Opportunities for Lien Hwa and Wistron Corp
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lien and Wistron is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lien Hwa Industrial and Wistron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron Corp 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 Wistron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron Corp has no effect on the direction of Lien Hwa i.e., Lien Hwa and Wistron Corp go up and down completely randomly.
Pair Corralation between Lien Hwa and Wistron Corp
Assuming the 90 days trading horizon Lien Hwa is expected to generate 3.44 times less return on investment than Wistron Corp. But when comparing it to its historical volatility, Lien Hwa Industrial is 1.59 times less risky than Wistron Corp. It trades about 0.17 of its potential returns per unit of risk. Wistron Corp is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 10,000 in Wistron Corp on November 28, 2024 and sell it today you would earn a total of 1,200 from holding Wistron Corp or generate 12.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Lien Hwa Industrial vs. Wistron Corp
Performance |
| Timeline |
| Lien Hwa Industrial |
| Wistron Corp |
Lien Hwa and Wistron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lien Hwa and Wistron Corp
The main advantage of trading using opposite Lien Hwa and Wistron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lien Hwa position performs unexpectedly, Wistron Corp 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 Wistron Corp will offset losses from the drop in Wistron Corp'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 |
| Wistron Corp vs. Pegatron Corp | Wistron Corp vs. Quanta Computer | Wistron Corp vs. Compal Electronics | Wistron Corp vs. Inventec 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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