Correlation Between Lian Hwa and Tehmag Foods
Can any of the company-specific risk be diversified away by investing in both Lian Hwa and Tehmag Foods 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 Lian Hwa and Tehmag Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lian Hwa Foods and Tehmag Foods, you can compare the effects of market volatilities on Lian Hwa and Tehmag Foods 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 Lian Hwa with a short position of Tehmag Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lian Hwa and Tehmag Foods.
Diversification Opportunities for Lian Hwa and Tehmag Foods
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lian and Tehmag is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and Tehmag Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tehmag Foods and Lian 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 Lian Hwa Foods are associated (or correlated) with Tehmag Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tehmag Foods has no effect on the direction of Lian Hwa i.e., Lian Hwa and Tehmag Foods go up and down completely randomly.
Pair Corralation between Lian Hwa and Tehmag Foods
Assuming the 90 days trading horizon Lian Hwa Foods is expected to generate 3.34 times more return on investment than Tehmag Foods. However, Lian Hwa is 3.34 times more volatile than Tehmag Foods. It trades about 0.18 of its potential returns per unit of risk. Tehmag Foods is currently generating about -0.11 per unit of risk. If you would invest 11,150 in Lian Hwa Foods on August 28, 2024 and sell it today you would earn a total of 600.00 from holding Lian Hwa Foods or generate 5.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Lian Hwa Foods vs. Tehmag Foods
Performance |
| Timeline |
| Lian Hwa Foods |
| Tehmag Foods |
Lian Hwa and Tehmag Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lian Hwa and Tehmag Foods
The main advantage of trading using opposite Lian Hwa and Tehmag Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lian Hwa position performs unexpectedly, Tehmag Foods 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 Tehmag Foods will offset losses from the drop in Tehmag Foods' long position.| Lian Hwa vs. Lien Hwa Industrial | Lian Hwa vs. Charoen Pokphand Enterprise | Lian Hwa vs. Great Wall Enterprise | Lian 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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