Correlation Between Tehmag Foods and Lian Hwa
Can any of the company-specific risk be diversified away by investing in both Tehmag Foods and Lian Hwa 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 Tehmag Foods and Lian Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tehmag Foods and Lian Hwa Foods, you can compare the effects of market volatilities on Tehmag Foods and Lian Hwa 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 Tehmag Foods with a short position of Lian Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tehmag Foods and Lian Hwa.
Diversification Opportunities for Tehmag Foods and Lian Hwa
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tehmag and Lian is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tehmag Foods and Lian Hwa Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lian Hwa Foods and Tehmag Foods 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 Tehmag Foods are associated (or correlated) with Lian Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lian Hwa Foods has no effect on the direction of Tehmag Foods i.e., Tehmag Foods and Lian Hwa go up and down completely randomly.
Pair Corralation between Tehmag Foods and Lian Hwa
Assuming the 90 days trading horizon Tehmag Foods is expected to generate 4.24 times less return on investment than Lian Hwa. But when comparing it to its historical volatility, Tehmag Foods is 4.08 times less risky than Lian Hwa. It trades about 0.24 of its potential returns per unit of risk. Lian Hwa Foods is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 13,100 in Lian Hwa Foods on October 24, 2024 and sell it today you would earn a total of 1,450 from holding Lian Hwa Foods or generate 11.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tehmag Foods vs. Lian Hwa Foods
Performance |
| Timeline |
| Tehmag Foods |
| Lian Hwa Foods |
Tehmag Foods and Lian Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tehmag Foods and Lian Hwa
The main advantage of trading using opposite Tehmag Foods and Lian Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tehmag Foods position performs unexpectedly, Lian Hwa 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 Lian Hwa will offset losses from the drop in Lian Hwa's long position.| Tehmag Foods vs. Wistron Information Technology | Tehmag Foods vs. Farglory FTZ Investment | Tehmag Foods vs. Quanta Storage | Tehmag Foods vs. Mitake Information |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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