Correlation Between Lien Chang and Lingsen Precision
Can any of the company-specific risk be diversified away by investing in both Lien Chang and Lingsen Precision 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 Lingsen Precision 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 Lingsen Precision Industries, you can compare the effects of market volatilities on Lien Chang and Lingsen Precision 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 Lingsen Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lien Chang and Lingsen Precision.
Diversification Opportunities for Lien Chang and Lingsen Precision
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lien and Lingsen is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lien Chang Electronic and Lingsen Precision Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lingsen Precision 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 Lingsen Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lingsen Precision has no effect on the direction of Lien Chang i.e., Lien Chang and Lingsen Precision go up and down completely randomly.
Pair Corralation between Lien Chang and Lingsen Precision
Assuming the 90 days trading horizon Lien Chang Electronic is expected to generate 1.38 times more return on investment than Lingsen Precision. However, Lien Chang is 1.38 times more volatile than Lingsen Precision Industries. It trades about 0.07 of its potential returns per unit of risk. Lingsen Precision Industries is currently generating about -0.07 per unit of risk. If you would invest 1,260 in Lien Chang Electronic on September 3, 2024 and sell it today you would earn a total of 335.00 from holding Lien Chang Electronic or generate 26.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lien Chang Electronic vs. Lingsen Precision Industries
Performance |
| Timeline |
| Lien Chang Electronic |
| Lingsen Precision |
Lien Chang and Lingsen Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lien Chang and Lingsen Precision
The main advantage of trading using opposite Lien Chang and Lingsen Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lien Chang position performs unexpectedly, Lingsen Precision 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 Lingsen Precision will offset losses from the drop in Lingsen Precision's 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 |
| Lingsen Precision vs. Taiwan Chinsan Electronic | Lingsen Precision vs. Lien Chang Electronic | Lingsen Precision vs. Elite Material Co | Lingsen Precision vs. ABC Taiwan Electronics |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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