Correlation Between Grape King and Lian Hwa
Can any of the company-specific risk be diversified away by investing in both Grape King and Lian Hwa 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 Grape King and Lian Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grape King Bio and Lian Hwa Foods, you can compare the effects of market volatilities on Grape King and Lian Hwa 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 Grape King with a short position of Lian Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grape King and Lian Hwa.
Diversification Opportunities for Grape King and Lian Hwa
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Grape and Lian is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Grape King Bio and Lian Hwa Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lian Hwa Foods and Grape King 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 Grape King Bio are associated (or correlated) with Lian Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lian Hwa Foods has no effect on the direction of Grape King i.e., Grape King and Lian Hwa go up and down completely randomly.
Pair Corralation between Grape King and Lian Hwa
Assuming the 90 days trading horizon Grape King Bio is expected to under-perform the Lian Hwa. But the stock apears to be less risky and, when comparing its historical volatility, Grape King Bio is 1.64 times less risky than Lian Hwa. The stock trades about -0.02 of its potential returns per unit of risk. The Lian Hwa Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 9,990 in Lian Hwa Foods on August 29, 2024 and sell it today you would earn a total of 2,010 from holding Lian Hwa Foods or generate 20.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grape King Bio vs. Lian Hwa Foods
Performance |
| Timeline |
| Grape King Bio |
| Lian Hwa Foods |
Grape King and Lian Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grape King and Lian Hwa
The main advantage of trading using opposite Grape King and Lian Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grape King position performs unexpectedly, Lian Hwa 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 Lian Hwa will offset losses from the drop in Lian Hwa's long position.| Grape King vs. Standard Foods Corp | Grape King vs. Eclat Textile Co | Grape King vs. Feng Tay Enterprises | Grape King vs. China Steel Chemical |
| Lian Hwa vs. Great Wall Enterprise | Lian Hwa vs. Uni President Enterprises Corp | Lian Hwa vs. Lien Hwa Industrial |
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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