Correlation Between Lien Chang and Cowealth Medical
Can any of the company-specific risk be diversified away by investing in both Lien Chang and Cowealth Medical 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 Cowealth Medical 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 Cowealth Medical Holding, you can compare the effects of market volatilities on Lien Chang and Cowealth Medical 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 Cowealth Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lien Chang and Cowealth Medical.
Diversification Opportunities for Lien Chang and Cowealth Medical
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lien and Cowealth is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lien Chang Electronic and Cowealth Medical Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cowealth Medical Holding 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 Cowealth Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cowealth Medical Holding has no effect on the direction of Lien Chang i.e., Lien Chang and Cowealth Medical go up and down completely randomly.
Pair Corralation between Lien Chang and Cowealth Medical
Assuming the 90 days trading horizon Lien Chang Electronic is expected to generate 1.28 times more return on investment than Cowealth Medical. However, Lien Chang is 1.28 times more volatile than Cowealth Medical Holding. It trades about 0.16 of its potential returns per unit of risk. Cowealth Medical Holding is currently generating about -0.04 per unit of risk. If you would invest 1,430 in Lien Chang Electronic on November 8, 2024 and sell it today you would earn a total of 50.00 from holding Lien Chang Electronic or generate 3.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lien Chang Electronic vs. Cowealth Medical Holding
Performance |
| Timeline |
| Lien Chang Electronic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Cowealth Medical Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Lien Chang and Cowealth Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lien Chang and Cowealth Medical
The main advantage of trading using opposite Lien Chang and Cowealth Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lien Chang position performs unexpectedly, Cowealth Medical 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 Cowealth Medical will offset losses from the drop in Cowealth Medical's long position.The idea behind Lien Chang Electronic and Cowealth Medical Holding 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.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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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