Correlation Between China Metal and Lien Chang
Can any of the company-specific risk be diversified away by investing in both China Metal and Lien Chang 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 China Metal and Lien Chang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Metal Products and Lien Chang Electronic, you can compare the effects of market volatilities on China Metal and Lien Chang 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 China Metal with a short position of Lien Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and Lien Chang.
Diversification Opportunities for China Metal and Lien Chang
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Lien is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Lien Chang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Chang Electronic and China Metal 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 China Metal Products are associated (or correlated) with Lien Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Chang Electronic has no effect on the direction of China Metal i.e., China Metal and Lien Chang go up and down completely randomly.
Pair Corralation between China Metal and Lien Chang
Assuming the 90 days trading horizon China Metal Products is expected to generate 0.53 times more return on investment than Lien Chang. However, China Metal Products is 1.88 times less risky than Lien Chang. It trades about -0.29 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about -0.2 per unit of risk. If you would invest 3,780 in China Metal Products on September 12, 2024 and sell it today you would lose (460.00) from holding China Metal Products or give up 12.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Metal Products vs. Lien Chang Electronic
Performance |
| Timeline |
| China Metal Products |
| Lien Chang Electronic |
China Metal and Lien Chang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Metal and Lien Chang
The main advantage of trading using opposite China Metal and Lien Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Metal position performs unexpectedly, Lien Chang 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 Lien Chang will offset losses from the drop in Lien Chang's long position.| China Metal vs. Tainan Spinning Co | China Metal vs. Lealea Enterprise Co | China Metal vs. China Petrochemical Development | China Metal vs. Ruentex Development Co |
| Lien Chang vs. AU Optronics | Lien Chang vs. Innolux Corp | Lien Chang vs. Ruentex Development Co | Lien Chang vs. WiseChip Semiconductor |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Stocks Directory Find actively traded stocks across global markets | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |