Correlation Between Lien Chang and Eternal Materials
Can any of the company-specific risk be diversified away by investing in both Lien Chang and Eternal Materials 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 Lien Chang and Eternal Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lien Chang Electronic and Eternal Materials Co, you can compare the effects of market volatilities on Lien Chang and Eternal Materials 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 Lien Chang with a short position of Eternal Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lien Chang and Eternal Materials.
Diversification Opportunities for Lien Chang and Eternal Materials
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lien and Eternal is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lien Chang Electronic and Eternal Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Materials and Lien Chang 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 Lien Chang Electronic are associated (or correlated) with Eternal Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Materials has no effect on the direction of Lien Chang i.e., Lien Chang and Eternal Materials go up and down completely randomly.
Pair Corralation between Lien Chang and Eternal Materials
Assuming the 90 days trading horizon Lien Chang Electronic is expected to generate 1.74 times more return on investment than Eternal Materials. However, Lien Chang is 1.74 times more volatile than Eternal Materials Co. It trades about 0.05 of its potential returns per unit of risk. Eternal Materials Co is currently generating about 0.0 per unit of risk. If you would invest 1,016 in Lien Chang Electronic on September 3, 2024 and sell it today you would earn a total of 579.00 from holding Lien Chang Electronic or generate 56.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Lien Chang Electronic vs. Eternal Materials Co
Performance |
| Timeline |
| Lien Chang Electronic |
| Eternal Materials |
Lien Chang and Eternal Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lien Chang and Eternal Materials
The main advantage of trading using opposite Lien Chang and Eternal Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lien Chang position performs unexpectedly, Eternal Materials 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 Eternal Materials will offset losses from the drop in Eternal Materials' long position.| Lien Chang vs. Taiwan Semiconductor Manufacturing | Lien Chang vs. Yang Ming Marine | Lien Chang vs. ASE Industrial Holding | Lien Chang vs. AU Optronics |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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