Correlation Between Maywufa and Lian Hwa
Can any of the company-specific risk be diversified away by investing in both Maywufa 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 Maywufa and Lian Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maywufa Co and Lian Hwa Foods, you can compare the effects of market volatilities on Maywufa 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 Maywufa with a short position of Lian Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maywufa and Lian Hwa.
Diversification Opportunities for Maywufa and Lian Hwa
Average diversification
The 3 months correlation between Maywufa and Lian is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Maywufa Co 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 Maywufa 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 Maywufa Co 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 Maywufa i.e., Maywufa and Lian Hwa go up and down completely randomly.
Pair Corralation between Maywufa and Lian Hwa
Assuming the 90 days trading horizon Maywufa is expected to generate 4.14 times less return on investment than Lian Hwa. In addition to that, Maywufa is 1.01 times more volatile than Lian Hwa Foods. It trades about 0.02 of its total potential returns per unit of risk. Lian Hwa Foods is currently generating about 0.09 per unit of volatility. If you would invest 8,690 in Lian Hwa Foods on August 29, 2024 and sell it today you would earn a total of 3,310 from holding Lian Hwa Foods or generate 38.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maywufa Co vs. Lian Hwa Foods
Performance |
| Timeline |
| Maywufa |
| Lian Hwa Foods |
Maywufa and Lian Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maywufa and Lian Hwa
The main advantage of trading using opposite Maywufa and Lian Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maywufa 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.| Maywufa vs. Great Wall Enterprise | Maywufa vs. Uni President Enterprises Corp | Maywufa vs. Lien Hwa Industrial |
| 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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