Correlation Between Lian Hwa and Maywufa
Can any of the company-specific risk be diversified away by investing in both Lian Hwa and Maywufa 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 Maywufa 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 Maywufa Co, you can compare the effects of market volatilities on Lian Hwa and Maywufa 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 Maywufa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lian Hwa and Maywufa.
Diversification Opportunities for Lian Hwa and Maywufa
Average diversification
The 3 months correlation between Lian and Maywufa is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and Maywufa Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maywufa 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 Maywufa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maywufa has no effect on the direction of Lian Hwa i.e., Lian Hwa and Maywufa go up and down completely randomly.
Pair Corralation between Lian Hwa and Maywufa
Assuming the 90 days trading horizon Lian Hwa Foods is expected to generate 0.98 times more return on investment than Maywufa. However, Lian Hwa Foods is 1.02 times less risky than Maywufa. It trades about 0.08 of its potential returns per unit of risk. Maywufa Co is currently generating about 0.04 per unit of risk. If you would invest 7,430 in Lian Hwa Foods on August 26, 2024 and sell it today you would earn a total of 4,120 from holding Lian Hwa Foods or generate 55.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lian Hwa Foods vs. Maywufa Co
Performance |
| Timeline |
| Lian Hwa Foods |
| Maywufa |
Lian Hwa and Maywufa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lian Hwa and Maywufa
The main advantage of trading using opposite Lian Hwa and Maywufa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lian Hwa position performs unexpectedly, Maywufa 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 Maywufa will offset losses from the drop in Maywufa's long position.| Lian Hwa vs. Uni President Enterprises Corp | Lian Hwa vs. Taiwan Cement Corp | Lian Hwa vs. Ruentex Development Co | Lian Hwa vs. Symtek Automation Asia |
| Maywufa vs. Lian Hwa Foods | Maywufa vs. Uni President Enterprises Corp | Maywufa vs. Taiwan Cement Corp | Maywufa vs. Ruentex Development 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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