Correlation Between FDC International and Lung Hwa
Can any of the company-specific risk be diversified away by investing in both FDC International and Lung Hwa 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 FDC International and Lung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FDC International Hotels and Lung Hwa Electronics, you can compare the effects of market volatilities on FDC International and Lung Hwa 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 FDC International with a short position of Lung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of FDC International and Lung Hwa.
Diversification Opportunities for FDC International and Lung Hwa
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FDC and Lung is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding FDC International Hotels and Lung Hwa Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lung Hwa Electronics and FDC International 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 FDC International Hotels are associated (or correlated) with Lung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lung Hwa Electronics has no effect on the direction of FDC International i.e., FDC International and Lung Hwa go up and down completely randomly.
Pair Corralation between FDC International and Lung Hwa
Assuming the 90 days trading horizon FDC International Hotels is expected to under-perform the Lung Hwa. But the stock apears to be less risky and, when comparing its historical volatility, FDC International Hotels is 2.16 times less risky than Lung Hwa. The stock trades about 0.0 of its potential returns per unit of risk. The Lung Hwa Electronics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7,930 in Lung Hwa Electronics on August 28, 2024 and sell it today you would earn a total of 70.00 from holding Lung Hwa Electronics or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FDC International Hotels vs. Lung Hwa Electronics
Performance |
| Timeline |
| FDC International Hotels |
| Lung Hwa Electronics |
FDC International and Lung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FDC International and Lung Hwa
The main advantage of trading using opposite FDC International and Lung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FDC International position performs unexpectedly, Lung Hwa 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 Lung Hwa will offset losses from the drop in Lung Hwa's long position.| FDC International vs. Taiwan Semiconductor Manufacturing | FDC International vs. Hon Hai Precision | FDC International vs. MediaTek | FDC International vs. Chunghwa Telecom Co |
| Lung Hwa vs. Chaintech Technology Corp | Lung Hwa vs. AVerMedia Technologies | Lung Hwa vs. Avision | Lung Hwa vs. Clevo 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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