Correlation Between Lotus Pharmaceutical and Chung Hsin
Can any of the company-specific risk be diversified away by investing in both Lotus Pharmaceutical and Chung Hsin 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 Lotus Pharmaceutical and Chung Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotus Pharmaceutical Co and Chung Hsin Electric Machinery, you can compare the effects of market volatilities on Lotus Pharmaceutical and Chung Hsin 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 Lotus Pharmaceutical with a short position of Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotus Pharmaceutical and Chung Hsin.
Diversification Opportunities for Lotus Pharmaceutical and Chung Hsin
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lotus and Chung is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Pharmaceutical Co and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric and Lotus Pharmaceutical 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 Lotus Pharmaceutical Co are associated (or correlated) with Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of Lotus Pharmaceutical i.e., Lotus Pharmaceutical and Chung Hsin go up and down completely randomly.
Pair Corralation between Lotus Pharmaceutical and Chung Hsin
Assuming the 90 days trading horizon Lotus Pharmaceutical Co is expected to generate 0.68 times more return on investment than Chung Hsin. However, Lotus Pharmaceutical Co is 1.47 times less risky than Chung Hsin. It trades about 0.16 of its potential returns per unit of risk. Chung Hsin Electric Machinery is currently generating about 0.03 per unit of risk. If you would invest 25,900 in Lotus Pharmaceutical Co on November 28, 2024 and sell it today you would earn a total of 1,150 from holding Lotus Pharmaceutical Co or generate 4.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotus Pharmaceutical Co vs. Chung Hsin Electric Machinery
Performance |
| Timeline |
| Lotus Pharmaceutical |
| Chung Hsin Electric |
Lotus Pharmaceutical and Chung Hsin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotus Pharmaceutical and Chung Hsin
The main advantage of trading using opposite Lotus Pharmaceutical and Chung Hsin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotus Pharmaceutical position performs unexpectedly, Chung Hsin 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 Chung Hsin will offset losses from the drop in Chung Hsin's long position.| Lotus Pharmaceutical vs. Chung Hsin Electric Machinery | Lotus Pharmaceutical vs. Nan Ya Printed | Lotus Pharmaceutical vs. Panion BF Biotech | Lotus Pharmaceutical vs. Adimmune Corp |
| Chung Hsin vs. TECO Electric Machinery | Chung Hsin vs. Fortune Electric Co | Chung Hsin vs. Taiwan Cement Corp | Chung Hsin vs. Walsin Lihwa Corp |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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