Correlation Between Lan Fa and Everest Textile
Can any of the company-specific risk be diversified away by investing in both Lan Fa and Everest 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 Lan Fa and Everest Textile 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 Everest Textile Co, you can compare the effects of market volatilities on Lan Fa and Everest 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 Lan Fa with a short position of Everest Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lan Fa and Everest Textile.
Diversification Opportunities for Lan Fa and Everest Textile
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lan and Everest is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lan Fa Textile and Everest Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everest Textile 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 Everest Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everest Textile has no effect on the direction of Lan Fa i.e., Lan Fa and Everest Textile go up and down completely randomly.
Pair Corralation between Lan Fa and Everest Textile
Assuming the 90 days trading horizon Lan Fa Textile is expected to generate 1.11 times more return on investment than Everest Textile. However, Lan Fa is 1.11 times more volatile than Everest Textile Co. It trades about 0.03 of its potential returns per unit of risk. Everest Textile Co is currently generating about 0.0 per unit of risk. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lan Fa Textile vs. Everest Textile Co
Performance |
| Timeline |
| Lan Fa Textile |
| Everest Textile |
Lan Fa and Everest Textile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lan Fa and Everest Textile
The main advantage of trading using opposite Lan Fa and Everest Textile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lan Fa position performs unexpectedly, Everest 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 Everest Textile will offset losses from the drop in Everest Textile'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 |
| Everest Textile vs. Far Eastern New | Everest Textile vs. Zig Sheng Industrial | Everest Textile vs. Eclat Textile Co | Everest Textile vs. Formosa Taffeta 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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