Correlation Between Lan Fa and Lealea Enterprise
Can any of the company-specific risk be diversified away by investing in both Lan Fa and Lealea Enterprise 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 Lan Fa and Lealea Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lan Fa Textile and Lealea Enterprise Co, you can compare the effects of market volatilities on Lan Fa and Lealea Enterprise 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 Lan Fa with a short position of Lealea Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lan Fa and Lealea Enterprise.
Diversification Opportunities for Lan Fa and Lealea Enterprise
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lan and Lealea is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lan Fa Textile and Lealea Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lealea Enterprise and Lan Fa 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 Lan Fa Textile are associated (or correlated) with Lealea Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lealea Enterprise has no effect on the direction of Lan Fa i.e., Lan Fa and Lealea Enterprise go up and down completely randomly.
Pair Corralation between Lan Fa and Lealea Enterprise
Assuming the 90 days trading horizon Lan Fa Textile is expected to under-perform the Lealea Enterprise. In addition to that, Lan Fa is 1.03 times more volatile than Lealea Enterprise Co. It trades about -0.07 of its total potential returns per unit of risk. Lealea Enterprise Co is currently generating about 0.07 per unit of volatility. If you would invest 904.00 in Lealea Enterprise Co on August 31, 2024 and sell it today you would earn a total of 11.00 from holding Lealea Enterprise Co or generate 1.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lan Fa Textile vs. Lealea Enterprise Co
Performance |
| Timeline |
| Lan Fa Textile |
| Lealea Enterprise |
Lan Fa and Lealea Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lan Fa and Lealea Enterprise
The main advantage of trading using opposite Lan Fa and Lealea Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lan Fa position performs unexpectedly, Lealea Enterprise 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 Lealea Enterprise will offset losses from the drop in Lealea Enterprise's long position.| Lan Fa vs. Lealea Enterprise Co | Lan Fa vs. Li Peng Enterprise | Lan Fa vs. De Licacy Industrial | Lan Fa vs. Chyang Sheng Dyeing |
| Lealea Enterprise vs. Li Peng Enterprise | Lealea Enterprise vs. Tainan Spinning Co | Lealea Enterprise vs. USI Corp | Lealea Enterprise vs. UPC Technology Corp |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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