Correlation Between Lindeman Asia and Wooyang
Can any of the company-specific risk be diversified away by investing in both Lindeman Asia and Wooyang 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 Lindeman Asia and Wooyang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lindeman Asia Investment and Wooyang Co, you can compare the effects of market volatilities on Lindeman Asia and Wooyang 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 Lindeman Asia with a short position of Wooyang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindeman Asia and Wooyang.
Diversification Opportunities for Lindeman Asia and Wooyang
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lindeman and Wooyang is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Lindeman Asia Investment and Wooyang Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wooyang and Lindeman Asia 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 Lindeman Asia Investment are associated (or correlated) with Wooyang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wooyang has no effect on the direction of Lindeman Asia i.e., Lindeman Asia and Wooyang go up and down completely randomly.
Pair Corralation between Lindeman Asia and Wooyang
Assuming the 90 days trading horizon Lindeman Asia Investment is expected to generate 0.92 times more return on investment than Wooyang. However, Lindeman Asia Investment is 1.09 times less risky than Wooyang. It trades about -0.2 of its potential returns per unit of risk. Wooyang Co is currently generating about -0.26 per unit of risk. If you would invest 441,500 in Lindeman Asia Investment on August 25, 2024 and sell it today you would lose (93,500) from holding Lindeman Asia Investment or give up 21.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lindeman Asia Investment vs. Wooyang Co
Performance |
| Timeline |
| Lindeman Asia Investment |
| Wooyang |
Lindeman Asia and Wooyang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lindeman Asia and Wooyang
The main advantage of trading using opposite Lindeman Asia and Wooyang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindeman Asia position performs unexpectedly, Wooyang 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 Wooyang will offset losses from the drop in Wooyang's long position.The idea behind Lindeman Asia Investment and Wooyang Co 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.| Wooyang vs. SBI Investment KOREA | Wooyang vs. Lindeman Asia Investment | Wooyang vs. SV Investment | Wooyang vs. LB 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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