Correlation Between Lian Hwa and Dadi Early
Can any of the company-specific risk be diversified away by investing in both Lian Hwa and Dadi Early 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 Dadi Early 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 Dadi Early Childhood Education, you can compare the effects of market volatilities on Lian Hwa and Dadi Early 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 Dadi Early. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lian Hwa and Dadi Early.
Diversification Opportunities for Lian Hwa and Dadi Early
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lian and Dadi is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and Dadi Early Childhood Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dadi Early Childhood 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 Dadi Early. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dadi Early Childhood has no effect on the direction of Lian Hwa i.e., Lian Hwa and Dadi Early go up and down completely randomly.
Pair Corralation between Lian Hwa and Dadi Early
Assuming the 90 days trading horizon Lian Hwa Foods is expected to generate 1.12 times more return on investment than Dadi Early. However, Lian Hwa is 1.12 times more volatile than Dadi Early Childhood Education. It trades about 0.22 of its potential returns per unit of risk. Dadi Early Childhood Education is currently generating about -0.2 per unit of risk. If you would invest 11,250 in Lian Hwa Foods on August 31, 2024 and sell it today you would earn a total of 750.00 from holding Lian Hwa Foods or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lian Hwa Foods vs. Dadi Early Childhood Education
Performance |
| Timeline |
| Lian Hwa Foods |
| Dadi Early Childhood |
Lian Hwa and Dadi Early Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lian Hwa and Dadi Early
The main advantage of trading using opposite Lian Hwa and Dadi Early positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lian Hwa position performs unexpectedly, Dadi Early 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 Dadi Early will offset losses from the drop in Dadi Early's long position.| Lian Hwa vs. Taisun Enterprise Co | Lian Hwa vs. De Licacy Industrial | Lian Hwa vs. Wisher Industrial Co | Lian Hwa vs. Tainan Enterprises Co |
| Dadi Early vs. Sporton International | Dadi Early vs. Simple Mart Retail | Dadi Early vs. Chung Hwa Food | Dadi Early vs. Cleanaway 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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