Correlation Between China Man and Lealea Enterprise
Can any of the company-specific risk be diversified away by investing in both China Man and Lealea Enterprise 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 Man and Lealea Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Man Made Fiber and Lealea Enterprise Co, you can compare the effects of market volatilities on China Man and Lealea Enterprise 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 Man with a short position of Lealea Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Man and Lealea Enterprise.
Diversification Opportunities for China Man and Lealea Enterprise
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Lealea is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding China Man Made Fiber and Lealea Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lealea Enterprise and China Man 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 Man Made Fiber are associated (or correlated) with Lealea Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lealea Enterprise has no effect on the direction of China Man i.e., China Man and Lealea Enterprise go up and down completely randomly.
Pair Corralation between China Man and Lealea Enterprise
Assuming the 90 days trading horizon China Man Made Fiber is expected to generate 1.37 times more return on investment than Lealea Enterprise. However, China Man is 1.37 times more volatile than Lealea Enterprise Co. It trades about 0.03 of its potential returns per unit of risk. Lealea Enterprise Co is currently generating about -0.02 per unit of risk. If you would invest 815.00 in China Man Made Fiber on August 28, 2024 and sell it today you would earn a total of 18.00 from holding China Man Made Fiber or generate 2.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Man Made Fiber vs. Lealea Enterprise Co
Performance |
| Timeline |
| China Man Made |
| Lealea Enterprise |
China Man and Lealea Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Man and Lealea Enterprise
The main advantage of trading using opposite China Man and Lealea Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Man position performs unexpectedly, Lealea Enterprise 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 Lealea Enterprise will offset losses from the drop in Lealea Enterprise's long position.The idea behind China Man Made Fiber and Lealea Enterprise Co 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.| Lealea Enterprise vs. Taiwan Semiconductor Manufacturing | Lealea Enterprise vs. Hon Hai Precision | Lealea Enterprise vs. MediaTek | Lealea Enterprise vs. Chunghwa Telecom 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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