Correlation Between Yi Jinn and Lan Fa
Can any of the company-specific risk be diversified away by investing in both Yi Jinn 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 Yi Jinn and Lan Fa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yi Jinn Industrial and Lan Fa Textile, you can compare the effects of market volatilities on Yi Jinn 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 Yi Jinn with a short position of Lan Fa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yi Jinn and Lan Fa.
Diversification Opportunities for Yi Jinn and Lan Fa
Very weak diversification
The 3 months correlation between 1457 and Lan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Yi Jinn Industrial 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 Yi Jinn 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 Yi Jinn Industrial 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 Yi Jinn i.e., Yi Jinn and Lan Fa go up and down completely randomly.
Pair Corralation between Yi Jinn and Lan Fa
Assuming the 90 days trading horizon Yi Jinn Industrial is expected to under-perform the Lan Fa. But the stock apears to be less risky and, when comparing its historical volatility, Yi Jinn Industrial is 1.12 times less risky than Lan Fa. The stock trades about -0.06 of its potential returns per unit of risk. The Lan Fa Textile is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,100 in Lan Fa Textile on September 3, 2024 and sell it today you would lose (107.00) from holding Lan Fa Textile or give up 9.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yi Jinn Industrial vs. Lan Fa Textile
Performance |
| Timeline |
| Yi Jinn Industrial |
| Lan Fa Textile |
Yi Jinn and Lan Fa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yi Jinn and Lan Fa
The main advantage of trading using opposite Yi Jinn and Lan Fa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yi Jinn 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.| Yi Jinn vs. Tainan Spinning Co | Yi Jinn vs. Chia Her Industrial | Yi Jinn vs. WiseChip Semiconductor | Yi Jinn vs. Novatek Microelectronics Corp |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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