Correlation Between Lan Fa and Zig Sheng
Can any of the company-specific risk be diversified away by investing in both Lan Fa and Zig Sheng 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 Zig Sheng 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 Zig Sheng Industrial, you can compare the effects of market volatilities on Lan Fa and Zig Sheng 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 Zig Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lan Fa and Zig Sheng.
Diversification Opportunities for Lan Fa and Zig Sheng
Very poor diversification
The 3 months correlation between Lan and Zig is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Lan Fa Textile and Zig Sheng Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zig Sheng Industrial 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 Zig Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zig Sheng Industrial has no effect on the direction of Lan Fa i.e., Lan Fa and Zig Sheng go up and down completely randomly.
Pair Corralation between Lan Fa and Zig Sheng
Assuming the 90 days trading horizon Lan Fa Textile is expected to generate 0.9 times more return on investment than Zig Sheng. However, Lan Fa Textile is 1.11 times less risky than Zig Sheng. It trades about 0.03 of its potential returns per unit of risk. Zig Sheng Industrial is currently generating about 0.0 per unit of risk. If you would invest 856.00 in Lan Fa Textile on September 4, 2024 and sell it today you would earn a total of 139.00 from holding Lan Fa Textile or generate 16.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Lan Fa Textile vs. Zig Sheng Industrial
Performance |
| Timeline |
| Lan Fa Textile |
| Zig Sheng Industrial |
Lan Fa and Zig Sheng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lan Fa and Zig Sheng
The main advantage of trading using opposite Lan Fa and Zig Sheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lan Fa position performs unexpectedly, Zig Sheng 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 Zig Sheng will offset losses from the drop in Zig Sheng'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 |
| Zig Sheng vs. Tainan Spinning Co | Zig Sheng vs. Chia Her Industrial | Zig Sheng vs. WiseChip Semiconductor | Zig Sheng vs. Novatek Microelectronics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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