Correlation Between Avision and Lung Hwa
Can any of the company-specific risk be diversified away by investing in both Avision and Lung 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 Avision and Lung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avision and Lung Hwa Electronics, you can compare the effects of market volatilities on Avision and Lung 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 Avision with a short position of Lung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avision and Lung Hwa.
Diversification Opportunities for Avision and Lung Hwa
Very good diversification
The 3 months correlation between Avision and Lung is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Avision and Lung Hwa Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lung Hwa Electronics and Avision 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 Avision are associated (or correlated) with Lung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lung Hwa Electronics has no effect on the direction of Avision i.e., Avision and Lung Hwa go up and down completely randomly.
Pair Corralation between Avision and Lung Hwa
Assuming the 90 days trading horizon Avision is expected to under-perform the Lung Hwa. But the stock apears to be less risky and, when comparing its historical volatility, Avision is 1.22 times less risky than Lung Hwa. The stock trades about -0.3 of its potential returns per unit of risk. The Lung Hwa Electronics is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 6,280 in Lung Hwa Electronics on August 28, 2024 and sell it today you would earn a total of 1,720 from holding Lung Hwa Electronics or generate 27.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avision vs. Lung Hwa Electronics
Performance |
| Timeline |
| Avision |
| Lung Hwa Electronics |
Avision and Lung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avision and Lung Hwa
The main advantage of trading using opposite Avision and Lung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avision position performs unexpectedly, Lung 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 Lung Hwa will offset losses from the drop in Lung Hwa's long position.The idea behind Avision and Lung Hwa Electronics 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.| Lung Hwa vs. Chaintech Technology Corp | Lung Hwa vs. AVerMedia Technologies | Lung Hwa vs. Avision | Lung Hwa vs. Clevo Co |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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