Correlation Between Lee Chi and Falcon Power
Can any of the company-specific risk be diversified away by investing in both Lee Chi and Falcon Power 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 Lee Chi and Falcon Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lee Chi Enterprises and Falcon Power Co, you can compare the effects of market volatilities on Lee Chi and Falcon Power 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 Lee Chi with a short position of Falcon Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lee Chi and Falcon Power.
Diversification Opportunities for Lee Chi and Falcon Power
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lee and Falcon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lee Chi Enterprises and Falcon Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Power and Lee Chi 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 Lee Chi Enterprises are associated (or correlated) with Falcon Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Power has no effect on the direction of Lee Chi i.e., Lee Chi and Falcon Power go up and down completely randomly.
Pair Corralation between Lee Chi and Falcon Power
Assuming the 90 days trading horizon Lee Chi Enterprises is expected to under-perform the Falcon Power. But the stock apears to be less risky and, when comparing its historical volatility, Lee Chi Enterprises is 2.8 times less risky than Falcon Power. The stock trades about -0.26 of its potential returns per unit of risk. The Falcon Power Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 1,887 in Falcon Power Co on August 29, 2024 and sell it today you would lose (77.00) from holding Falcon Power Co or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lee Chi Enterprises vs. Falcon Power Co
Performance |
| Timeline |
| Lee Chi Enterprises |
| Falcon Power |
Lee Chi and Falcon Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lee Chi and Falcon Power
The main advantage of trading using opposite Lee Chi and Falcon Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lee Chi position performs unexpectedly, Falcon Power 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 Falcon Power will offset losses from the drop in Falcon Power's long position.| Lee Chi vs. Yulon Finance Corp | Lee Chi vs. Taiwan Secom Co | Lee Chi vs. Pou Chen Corp | Lee Chi vs. Great Wall Enterprise |
| Falcon Power vs. Yulon Motor Co | Falcon Power vs. Far Eastern Department | Falcon Power vs. China Steel Corp | Falcon Power vs. Chang Hwa Commercial |
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.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |