Correlation Between Lian Hwa and Cameo Communications
Can any of the company-specific risk be diversified away by investing in both Lian Hwa and Cameo Communications 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 Cameo Communications 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 Cameo Communications, you can compare the effects of market volatilities on Lian Hwa and Cameo Communications 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 Cameo Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lian Hwa and Cameo Communications.
Diversification Opportunities for Lian Hwa and Cameo Communications
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lian and Cameo is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and Cameo Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cameo Communications 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 Cameo Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cameo Communications has no effect on the direction of Lian Hwa i.e., Lian Hwa and Cameo Communications go up and down completely randomly.
Pair Corralation between Lian Hwa and Cameo Communications
Assuming the 90 days trading horizon Lian Hwa Foods is expected to generate 0.67 times more return on investment than Cameo Communications. However, Lian Hwa Foods is 1.49 times less risky than Cameo Communications. It trades about 0.11 of its potential returns per unit of risk. Cameo Communications is currently generating about 0.04 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 Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lian Hwa Foods vs. Cameo Communications
Performance |
| Timeline |
| Lian Hwa Foods |
| Cameo Communications |
Lian Hwa and Cameo Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lian Hwa and Cameo Communications
The main advantage of trading using opposite Lian Hwa and Cameo Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lian Hwa position performs unexpectedly, Cameo Communications 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 Cameo Communications will offset losses from the drop in Cameo Communications' 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 |
| Cameo Communications vs. Gemtek Technology Co | Cameo Communications vs. CyberTAN Technology | Cameo Communications vs. Alpha Networks | Cameo Communications vs. D Link 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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