Correlation Between Chung Hsin and Lihtai Construction
Can any of the company-specific risk be diversified away by investing in both Chung Hsin and Lihtai Construction 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 Chung Hsin and Lihtai Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hsin Electric Machinery and Lihtai Construction Enterprise, you can compare the effects of market volatilities on Chung Hsin and Lihtai Construction 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 Chung Hsin with a short position of Lihtai Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hsin and Lihtai Construction.
Diversification Opportunities for Chung Hsin and Lihtai Construction
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chung and Lihtai is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Lihtai Construction Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lihtai Construction and Chung Hsin 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 Chung Hsin Electric Machinery are associated (or correlated) with Lihtai Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lihtai Construction has no effect on the direction of Chung Hsin i.e., Chung Hsin and Lihtai Construction go up and down completely randomly.
Pair Corralation between Chung Hsin and Lihtai Construction
Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the Lihtai Construction. In addition to that, Chung Hsin is 4.13 times more volatile than Lihtai Construction Enterprise. It trades about -0.07 of its total potential returns per unit of risk. Lihtai Construction Enterprise is currently generating about 0.11 per unit of volatility. If you would invest 8,180 in Lihtai Construction Enterprise on November 5, 2024 and sell it today you would earn a total of 50.00 from holding Lihtai Construction Enterprise or generate 0.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hsin Electric Machinery vs. Lihtai Construction Enterprise
Performance |
| Timeline |
| Chung Hsin Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Lihtai Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Chung Hsin and Lihtai Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hsin and Lihtai Construction
The main advantage of trading using opposite Chung Hsin and Lihtai Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hsin position performs unexpectedly, Lihtai Construction 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 Lihtai Construction will offset losses from the drop in Lihtai Construction's long position.The idea behind Chung Hsin Electric Machinery and Lihtai Construction Enterprise 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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