Correlation Between Tung Ho and Li Peng
Can any of the company-specific risk be diversified away by investing in both Tung Ho and Li Peng 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 Tung Ho and Li Peng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tung Ho Steel and Li Peng Enterprise, you can compare the effects of market volatilities on Tung Ho and Li Peng 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 Tung Ho with a short position of Li Peng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tung Ho and Li Peng.
Diversification Opportunities for Tung Ho and Li Peng
Poor diversification
The 3 months correlation between Tung and 1447 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Tung Ho Steel and Li Peng Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Peng Enterprise and Tung Ho 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 Tung Ho Steel are associated (or correlated) with Li Peng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Peng Enterprise has no effect on the direction of Tung Ho i.e., Tung Ho and Li Peng go up and down completely randomly.
Pair Corralation between Tung Ho and Li Peng
Assuming the 90 days trading horizon Tung Ho Steel is expected to under-perform the Li Peng. But the stock apears to be less risky and, when comparing its historical volatility, Tung Ho Steel is 1.99 times less risky than Li Peng. The stock trades about -0.02 of its potential returns per unit of risk. The Li Peng Enterprise is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 812.00 in Li Peng Enterprise on September 3, 2024 and sell it today you would lose (36.00) from holding Li Peng Enterprise or give up 4.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tung Ho Steel vs. Li Peng Enterprise
Performance |
| Timeline |
| Tung Ho Steel |
| Li Peng Enterprise |
Tung Ho and Li Peng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tung Ho and Li Peng
The main advantage of trading using opposite Tung Ho and Li Peng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tung Ho position performs unexpectedly, Li Peng 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 Li Peng will offset losses from the drop in Li Peng's long position.The idea behind Tung Ho Steel and Li Peng Enterprise 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.| Li Peng vs. China Mobile | Li Peng vs. Shan Loong Transportation Co | Li Peng vs. Tainet Communication System | Li Peng vs. China Metal Products |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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