Correlation Between Lian Hwa and Information Technology
Can any of the company-specific risk be diversified away by investing in both Lian Hwa and Information Technology 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 Information Technology 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 Information Technology Total, you can compare the effects of market volatilities on Lian Hwa and Information Technology 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 Information Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lian Hwa and Information Technology.
Diversification Opportunities for Lian Hwa and Information Technology
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lian and Information is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and Information Technology Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Technology 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 Information Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Technology has no effect on the direction of Lian Hwa i.e., Lian Hwa and Information Technology go up and down completely randomly.
Pair Corralation between Lian Hwa and Information Technology
Assuming the 90 days trading horizon Lian Hwa Foods is expected to generate 0.59 times more return on investment than Information Technology. However, Lian Hwa Foods is 1.7 times less risky than Information Technology. It trades about 0.13 of its potential returns per unit of risk. Information Technology Total is currently generating about 0.04 per unit of risk. If you would invest 10,750 in Lian Hwa Foods on August 28, 2024 and sell it today you would earn a total of 1,100 from holding Lian Hwa Foods or generate 10.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lian Hwa Foods vs. Information Technology Total
Performance |
| Timeline |
| Lian Hwa Foods |
| Information Technology |
Lian Hwa and Information Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lian Hwa and Information Technology
The main advantage of trading using opposite Lian Hwa and Information Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lian Hwa position performs unexpectedly, Information Technology 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 Information Technology will offset losses from the drop in Information Technology'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 |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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