Correlation Between Lian Hwa and Tainet Communication
Can any of the company-specific risk be diversified away by investing in both Lian Hwa and Tainet Communication 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 Tainet Communication 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 Tainet Communication System, you can compare the effects of market volatilities on Lian Hwa and Tainet Communication 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 Tainet Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lian Hwa and Tainet Communication.
Diversification Opportunities for Lian Hwa and Tainet Communication
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lian and Tainet is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and Tainet Communication System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainet Communication 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 Tainet Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainet Communication has no effect on the direction of Lian Hwa i.e., Lian Hwa and Tainet Communication go up and down completely randomly.
Pair Corralation between Lian Hwa and Tainet Communication
Assuming the 90 days trading horizon Lian Hwa Foods is expected to generate 0.51 times more return on investment than Tainet Communication. However, Lian Hwa Foods is 1.97 times less risky than Tainet Communication. It trades about 0.11 of its potential returns per unit of risk. Tainet Communication System is currently generating about 0.02 per unit of risk. If you would invest 8,820 in Lian Hwa Foods on September 14, 2024 and sell it today you would earn a total of 4,030 from holding Lian Hwa Foods or generate 45.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lian Hwa Foods vs. Tainet Communication System
Performance |
| Timeline |
| Lian Hwa Foods |
| Tainet Communication |
Lian Hwa and Tainet Communication Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lian Hwa and Tainet Communication
The main advantage of trading using opposite Lian Hwa and Tainet Communication positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lian Hwa position performs unexpectedly, Tainet Communication 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 Tainet Communication will offset losses from the drop in Tainet Communication's long position.| Lian Hwa vs. Standard Foods Corp | Lian Hwa vs. Uni President Enterprises Corp | Lian Hwa vs. Great Wall Enterprise | Lian Hwa vs. Ruentex Development Co |
| Tainet Communication vs. Gemtek Technology Co | Tainet Communication vs. Ruentex Development Co | Tainet Communication vs. WiseChip Semiconductor | Tainet Communication vs. Novatek Microelectronics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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