Correlation Between De Licacy and Hanpin Electron
Can any of the company-specific risk be diversified away by investing in both De Licacy and Hanpin Electron 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 De Licacy and Hanpin Electron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between De Licacy Industrial and Hanpin Electron Co, you can compare the effects of market volatilities on De Licacy and Hanpin Electron 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 De Licacy with a short position of Hanpin Electron. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Licacy and Hanpin Electron.
Diversification Opportunities for De Licacy and Hanpin Electron
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between 1464 and Hanpin is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding De Licacy Industrial and Hanpin Electron Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanpin Electron and De Licacy 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 De Licacy Industrial are associated (or correlated) with Hanpin Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanpin Electron has no effect on the direction of De Licacy i.e., De Licacy and Hanpin Electron go up and down completely randomly.
Pair Corralation between De Licacy and Hanpin Electron
Assuming the 90 days trading horizon De Licacy is expected to generate 2.98 times less return on investment than Hanpin Electron. But when comparing it to its historical volatility, De Licacy Industrial is 1.15 times less risky than Hanpin Electron. It trades about 0.03 of its potential returns per unit of risk. Hanpin Electron Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,890 in Hanpin Electron Co on November 2, 2024 and sell it today you would earn a total of 2,750 from holding Hanpin Electron Co or generate 95.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
De Licacy Industrial vs. Hanpin Electron Co
Performance |
| Timeline |
| De Licacy Industrial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Hanpin Electron |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
De Licacy and Hanpin Electron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with De Licacy and Hanpin Electron
The main advantage of trading using opposite De Licacy and Hanpin Electron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Licacy position performs unexpectedly, Hanpin Electron 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 Hanpin Electron will offset losses from the drop in Hanpin Electron's long position.The idea behind De Licacy Industrial and Hanpin Electron Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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