Correlation Between Lian Hwa and XAC Automation
Can any of the company-specific risk be diversified away by investing in both Lian Hwa and XAC Automation 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 XAC Automation 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 XAC Automation, you can compare the effects of market volatilities on Lian Hwa and XAC Automation 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 XAC Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lian Hwa and XAC Automation.
Diversification Opportunities for Lian Hwa and XAC Automation
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lian and XAC is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and XAC Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAC Automation 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 XAC Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAC Automation has no effect on the direction of Lian Hwa i.e., Lian Hwa and XAC Automation go up and down completely randomly.
Pair Corralation between Lian Hwa and XAC Automation
Assuming the 90 days trading horizon Lian Hwa Foods is expected to generate 0.66 times more return on investment than XAC Automation. However, Lian Hwa Foods is 1.52 times less risky than XAC Automation. It trades about 0.08 of its potential returns per unit of risk. XAC Automation is currently generating about 0.03 per unit of risk. If you would invest 7,400 in Lian Hwa Foods on September 4, 2024 and sell it today you would earn a total of 4,550 from holding Lian Hwa Foods or generate 61.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Lian Hwa Foods vs. XAC Automation
Performance |
| Timeline |
| Lian Hwa Foods |
| XAC Automation |
Lian Hwa and XAC Automation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lian Hwa and XAC Automation
The main advantage of trading using opposite Lian Hwa and XAC Automation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lian Hwa position performs unexpectedly, XAC Automation 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 XAC Automation will offset losses from the drop in XAC Automation's long position.The idea behind Lian Hwa Foods and XAC Automation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| XAC Automation vs. Taiwan Steel Union | XAC Automation vs. China Steel Corp | XAC Automation vs. Yieh United Steel | XAC Automation vs. Trade Van Information Services |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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