Correlation Between Lien Hwa and Microbio
Can any of the company-specific risk be diversified away by investing in both Lien Hwa and Microbio 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 Microbio 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 Microbio Co, you can compare the effects of market volatilities on Lien Hwa and Microbio 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 Microbio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lien Hwa and Microbio.
Diversification Opportunities for Lien Hwa and Microbio
Almost no diversification
The 3 months correlation between Lien and Microbio is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Lien Hwa Industrial and Microbio Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microbio 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 Microbio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microbio has no effect on the direction of Lien Hwa i.e., Lien Hwa and Microbio go up and down completely randomly.
Pair Corralation between Lien Hwa and Microbio
Assuming the 90 days trading horizon Lien Hwa Industrial is expected to generate 0.63 times more return on investment than Microbio. However, Lien Hwa Industrial is 1.6 times less risky than Microbio. It trades about -0.29 of its potential returns per unit of risk. Microbio Co is currently generating about -0.19 per unit of risk. If you would invest 5,880 in Lien Hwa Industrial on October 25, 2024 and sell it today you would lose (920.00) from holding Lien Hwa Industrial or give up 15.65% 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. Microbio Co
Performance |
| Timeline |
| Lien Hwa Industrial |
| Microbio |
Lien Hwa and Microbio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lien Hwa and Microbio
The main advantage of trading using opposite Lien Hwa and Microbio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lien Hwa position performs unexpectedly, Microbio 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 Microbio will offset losses from the drop in Microbio's long position.| Lien Hwa vs. Uni President Enterprises Corp | Lien Hwa vs. Taisun Enterprise Co | Lien Hwa vs. AGV Products Corp | Lien Hwa vs. Great Wall Enterprise |
| Microbio vs. Uni President Enterprises Corp | Microbio vs. Tingyi Holding Corp | Microbio vs. Lien Hwa Industrial | Microbio vs. Great Wall Enterprise |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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