Correlation Between Reward Wool and Lily Textile
Can any of the company-specific risk be diversified away by investing in both Reward Wool and Lily Textile 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 Reward Wool and Lily Textile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reward Wool Industry and Lily Textile Co, you can compare the effects of market volatilities on Reward Wool and Lily Textile 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 Reward Wool with a short position of Lily Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reward Wool and Lily Textile.
Diversification Opportunities for Reward Wool and Lily Textile
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Reward and Lily is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Reward Wool Industry and Lily Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lily Textile and Reward Wool 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 Reward Wool Industry are associated (or correlated) with Lily Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lily Textile has no effect on the direction of Reward Wool i.e., Reward Wool and Lily Textile go up and down completely randomly.
Pair Corralation between Reward Wool and Lily Textile
Assuming the 90 days trading horizon Reward Wool Industry is expected to generate 1.06 times more return on investment than Lily Textile. However, Reward Wool is 1.06 times more volatile than Lily Textile Co. It trades about 0.08 of its potential returns per unit of risk. Lily Textile Co is currently generating about 0.06 per unit of risk. If you would invest 2,020 in Reward Wool Industry on August 26, 2024 and sell it today you would earn a total of 1,745 from holding Reward Wool Industry or generate 86.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reward Wool Industry vs. Lily Textile Co
Performance |
| Timeline |
| Reward Wool Industry |
| Lily Textile |
Reward Wool and Lily Textile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reward Wool and Lily Textile
The main advantage of trading using opposite Reward Wool and Lily Textile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reward Wool position performs unexpectedly, Lily Textile 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 Lily Textile will offset losses from the drop in Lily Textile's long position.| Reward Wool vs. Taiwan Semiconductor Manufacturing | Reward Wool vs. Hon Hai Precision | Reward Wool vs. MediaTek | Reward Wool vs. Chunghwa Telecom Co |
| Lily Textile vs. Taiwan Semiconductor Manufacturing | Lily Textile vs. Hon Hai Precision | Lily Textile vs. MediaTek | Lily Textile vs. Chunghwa Telecom 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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