Correlation Between Tainan Spinning and Lan Fa
Can any of the company-specific risk be diversified away by investing in both Tainan Spinning and Lan Fa 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 Tainan Spinning and Lan Fa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tainan Spinning Co and Lan Fa Textile, you can compare the effects of market volatilities on Tainan Spinning and Lan Fa 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 Tainan Spinning with a short position of Lan Fa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tainan Spinning and Lan Fa.
Diversification Opportunities for Tainan Spinning and Lan Fa
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tainan and Lan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co and Lan Fa Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lan Fa Textile and Tainan Spinning 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 Tainan Spinning Co are associated (or correlated) with Lan Fa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lan Fa Textile has no effect on the direction of Tainan Spinning i.e., Tainan Spinning and Lan Fa go up and down completely randomly.
Pair Corralation between Tainan Spinning and Lan Fa
Assuming the 90 days trading horizon Tainan Spinning Co is expected to under-perform the Lan Fa. But the stock apears to be less risky and, when comparing its historical volatility, Tainan Spinning Co is 1.04 times less risky than Lan Fa. The stock trades about -0.01 of its potential returns per unit of risk. The Lan Fa Textile is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 848.00 in Lan Fa Textile on September 3, 2024 and sell it today you would earn a total of 145.00 from holding Lan Fa Textile or generate 17.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tainan Spinning Co vs. Lan Fa Textile
Performance |
| Timeline |
| Tainan Spinning |
| Lan Fa Textile |
Tainan Spinning and Lan Fa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tainan Spinning and Lan Fa
The main advantage of trading using opposite Tainan Spinning and Lan Fa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tainan Spinning position performs unexpectedly, Lan Fa 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 Lan Fa will offset losses from the drop in Lan Fa's long position.| Tainan Spinning vs. Lealea Enterprise Co | Tainan Spinning vs. China Petrochemical Development | Tainan Spinning vs. Li Peng Enterprise | Tainan Spinning vs. Oriental Union Chemical |
| Lan Fa vs. Lealea Enterprise Co | Lan Fa vs. Li Peng Enterprise | Lan Fa vs. De Licacy Industrial | Lan Fa vs. Chyang Sheng Dyeing |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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