Correlation Between Lian Hwa and Pacific Hospital
Can any of the company-specific risk be diversified away by investing in both Lian Hwa and Pacific Hospital 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 Pacific Hospital 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 Pacific Hospital Supply, you can compare the effects of market volatilities on Lian Hwa and Pacific Hospital 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 Pacific Hospital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lian Hwa and Pacific Hospital.
Diversification Opportunities for Lian Hwa and Pacific Hospital
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lian and Pacific is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and Pacific Hospital Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Hospital Supply 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 Pacific Hospital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Hospital Supply has no effect on the direction of Lian Hwa i.e., Lian Hwa and Pacific Hospital go up and down completely randomly.
Pair Corralation between Lian Hwa and Pacific Hospital
Assuming the 90 days trading horizon Lian Hwa Foods is expected to generate 1.5 times more return on investment than Pacific Hospital. However, Lian Hwa is 1.5 times more volatile than Pacific Hospital Supply. It trades about 0.1 of its potential returns per unit of risk. Pacific Hospital Supply is currently generating about 0.05 per unit of risk. If you would invest 8,730 in Lian Hwa Foods on November 28, 2024 and sell it today you would earn a total of 8,070 from holding Lian Hwa Foods or generate 92.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lian Hwa Foods vs. Pacific Hospital Supply
Performance |
| Timeline |
| Lian Hwa Foods |
| Pacific Hospital Supply |
Lian Hwa and Pacific Hospital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lian Hwa and Pacific Hospital
The main advantage of trading using opposite Lian Hwa and Pacific Hospital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lian Hwa position performs unexpectedly, Pacific Hospital 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 Pacific Hospital will offset losses from the drop in Pacific Hospital's 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 |
| Pacific Hospital vs. StShine Optical Co | Pacific Hospital vs. Bioteque | Pacific Hospital vs. United Orthopedic | Pacific Hospital vs. TTY Biopharm 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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