Correlation Between Lien Chang and Tung Thih
Can any of the company-specific risk be diversified away by investing in both Lien Chang and Tung Thih 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 Tung Thih 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 Tung Thih Electronic, you can compare the effects of market volatilities on Lien Chang and Tung Thih 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 Tung Thih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lien Chang and Tung Thih.
Diversification Opportunities for Lien Chang and Tung Thih
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lien and Tung is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lien Chang Electronic and Tung Thih Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Thih Electronic 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 Tung Thih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Thih Electronic has no effect on the direction of Lien Chang i.e., Lien Chang and Tung Thih go up and down completely randomly.
Pair Corralation between Lien Chang and Tung Thih
Assuming the 90 days trading horizon Lien Chang is expected to generate 31.25 times less return on investment than Tung Thih. But when comparing it to its historical volatility, Lien Chang Electronic is 28.8 times less risky than Tung Thih. It trades about 0.05 of its potential returns per unit of risk. Tung Thih Electronic is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 13,310 in Tung Thih Electronic on September 3, 2024 and sell it today you would lose (3,310) from holding Tung Thih Electronic or give up 24.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Lien Chang Electronic vs. Tung Thih Electronic
Performance |
| Timeline |
| Lien Chang Electronic |
| Tung Thih Electronic |
Lien Chang and Tung Thih Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lien Chang and Tung Thih
The main advantage of trading using opposite Lien Chang and Tung Thih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lien Chang position performs unexpectedly, Tung Thih 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 Tung Thih will offset losses from the drop in Tung Thih'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 |
| Tung Thih vs. E Lead Electronic Co | Tung Thih vs. Jentech Precision Industrial | Tung Thih vs. Turvo International Co | Tung Thih vs. Ruentex Development 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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