Correlation Between Lu Hai and Chunghwa Chemical
Can any of the company-specific risk be diversified away by investing in both Lu Hai and Chunghwa Chemical 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 Chunghwa Chemical 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 Chunghwa Chemical Synthesis, you can compare the effects of market volatilities on Lu Hai and Chunghwa Chemical 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 Chunghwa Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lu Hai and Chunghwa Chemical.
Diversification Opportunities for Lu Hai and Chunghwa Chemical
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 2115 and Chunghwa is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lu Hai Holding and Chunghwa Chemical Synthesis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Chemical 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 Chunghwa Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Chemical has no effect on the direction of Lu Hai i.e., Lu Hai and Chunghwa Chemical go up and down completely randomly.
Pair Corralation between Lu Hai and Chunghwa Chemical
Assuming the 90 days trading horizon Lu Hai Holding is expected to generate 0.67 times more return on investment than Chunghwa Chemical. However, Lu Hai Holding is 1.49 times less risky than Chunghwa Chemical. It trades about -0.11 of its potential returns per unit of risk. Chunghwa Chemical Synthesis is currently generating about -0.32 per unit of risk. If you would invest 3,155 in Lu Hai Holding on August 30, 2024 and sell it today you would lose (80.00) from holding Lu Hai Holding or give up 2.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lu Hai Holding vs. Chunghwa Chemical Synthesis
Performance |
| Timeline |
| Lu Hai Holding |
| Chunghwa Chemical |
Lu Hai and Chunghwa Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lu Hai and Chunghwa Chemical
The main advantage of trading using opposite Lu Hai and Chunghwa Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lu Hai position performs unexpectedly, Chunghwa Chemical 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 Chunghwa Chemical will offset losses from the drop in Chunghwa Chemical's long position.| Lu Hai vs. Hota Industrial Mfg | Lu Hai vs. BizLink Holding | Lu Hai vs. Cub Elecparts | Lu Hai vs. Hu Lane Associate |
| Chunghwa Chemical vs. Sinphar Pharmaceutical Co | Chunghwa Chemical vs. Grape King Bio | Chunghwa Chemical vs. Apex Biotechnology Corp | Chunghwa Chemical vs. Leatec Fine Ceramics |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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