Correlation Between Lung Hwa and FDC International
Can any of the company-specific risk be diversified away by investing in both Lung Hwa and FDC International 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 Lung Hwa and FDC International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lung Hwa Electronics and FDC International Hotels, you can compare the effects of market volatilities on Lung Hwa and FDC International 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 Lung Hwa with a short position of FDC International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lung Hwa and FDC International.
Diversification Opportunities for Lung Hwa and FDC International
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lung and FDC is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lung Hwa Electronics and FDC International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDC International Hotels and Lung Hwa 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 Lung Hwa Electronics are associated (or correlated) with FDC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDC International Hotels has no effect on the direction of Lung Hwa i.e., Lung Hwa and FDC International go up and down completely randomly.
Pair Corralation between Lung Hwa and FDC International
Assuming the 90 days trading horizon Lung Hwa Electronics is expected to generate 1.39 times more return on investment than FDC International. However, Lung Hwa is 1.39 times more volatile than FDC International Hotels. It trades about 0.1 of its potential returns per unit of risk. FDC International Hotels is currently generating about -0.02 per unit of risk. If you would invest 2,260 in Lung Hwa Electronics on August 24, 2024 and sell it today you would earn a total of 5,740 from holding Lung Hwa Electronics or generate 253.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lung Hwa Electronics vs. FDC International Hotels
Performance |
| Timeline |
| Lung Hwa Electronics |
| FDC International Hotels |
Lung Hwa and FDC International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lung Hwa and FDC International
The main advantage of trading using opposite Lung Hwa and FDC International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lung Hwa position performs unexpectedly, FDC International 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 FDC International will offset losses from the drop in FDC International's long position.| Lung Hwa vs. Taiwan Semiconductor Manufacturing | Lung Hwa vs. Hon Hai Precision | Lung Hwa vs. MediaTek | Lung Hwa vs. Chunghwa Telecom Co |
| FDC International vs. Taiwan Semiconductor Manufacturing | FDC International vs. Hon Hai Precision | FDC International vs. MediaTek | FDC International vs. Chunghwa Telecom 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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