Correlation Between Lu Hai and Hota Industrial
Can any of the company-specific risk be diversified away by investing in both Lu Hai and Hota Industrial 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 Lu Hai and Hota Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lu Hai Holding and Hota Industrial Mfg, you can compare the effects of market volatilities on Lu Hai and Hota Industrial 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 Lu Hai with a short position of Hota Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lu Hai and Hota Industrial.
Diversification Opportunities for Lu Hai and Hota Industrial
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 2115 and Hota is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lu Hai Holding and Hota Industrial Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hota Industrial Mfg and Lu Hai 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 Lu Hai Holding are associated (or correlated) with Hota Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hota Industrial Mfg has no effect on the direction of Lu Hai i.e., Lu Hai and Hota Industrial go up and down completely randomly.
Pair Corralation between Lu Hai and Hota Industrial
Assuming the 90 days trading horizon Lu Hai is expected to generate 12.39 times less return on investment than Hota Industrial. But when comparing it to its historical volatility, Lu Hai Holding is 6.73 times less risky than Hota Industrial. It trades about 0.34 of its potential returns per unit of risk. Hota Industrial Mfg is currently generating about 0.62 of returns per unit of risk over similar time horizon. If you would invest 5,920 in Hota Industrial Mfg on November 28, 2024 and sell it today you would earn a total of 2,730 from holding Hota Industrial Mfg or generate 46.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 94.44% |
Values | Daily Returns |
Lu Hai Holding vs. Hota Industrial Mfg
Performance |
Timeline |
Lu Hai Holding |
Hota Industrial Mfg |
Lu Hai and Hota Industrial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lu Hai and Hota Industrial
The main advantage of trading using opposite Lu Hai and Hota Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lu Hai position performs unexpectedly, Hota Industrial 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 Hota Industrial will offset losses from the drop in Hota Industrial's long position.Lu Hai vs. Chunghwa Chemical Synthesis | Lu Hai vs. Sanyang Motor Co | Lu Hai vs. Turvo International Co | Lu Hai vs. Iron Force Industrial |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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