Correlation Between Lee Chi and Sun Race
Can any of the company-specific risk be diversified away by investing in both Lee Chi and Sun Race 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 Sun Race 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 Sun Race Sturmey Archer, you can compare the effects of market volatilities on Lee Chi and Sun Race 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 Sun Race. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lee Chi and Sun Race.
Diversification Opportunities for Lee Chi and Sun Race
Very poor diversification
The 3 months correlation between Lee and Sun is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lee Chi Enterprises and Sun Race Sturmey Archer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Race Sturmey 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 Sun Race. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Race Sturmey has no effect on the direction of Lee Chi i.e., Lee Chi and Sun Race go up and down completely randomly.
Pair Corralation between Lee Chi and Sun Race
Assuming the 90 days trading horizon Lee Chi Enterprises is expected to generate 0.54 times more return on investment than Sun Race. However, Lee Chi Enterprises is 1.85 times less risky than Sun Race. It trades about -0.28 of its potential returns per unit of risk. Sun Race Sturmey Archer is currently generating about -0.39 per unit of risk. If you would invest 1,490 in Lee Chi Enterprises on August 30, 2024 and sell it today you would lose (75.00) from holding Lee Chi Enterprises or give up 5.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lee Chi Enterprises vs. Sun Race Sturmey Archer
Performance |
| Timeline |
| Lee Chi Enterprises |
| Sun Race Sturmey |
Lee Chi and Sun Race Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lee Chi and Sun Race
The main advantage of trading using opposite Lee Chi and Sun Race positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lee Chi position performs unexpectedly, Sun Race 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 Sun Race will offset losses from the drop in Sun Race's long position.The idea behind Lee Chi Enterprises and Sun Race Sturmey Archer 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.| Sun Race vs. Lee Chi Enterprises | Sun Race vs. Basso Industry Corp | Sun Race vs. Giant Manufacturing Co | Sun Race vs. Merida Industry 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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