Correlation Between Innolux Corp and Lien Chang
Can any of the company-specific risk be diversified away by investing in both Innolux Corp and Lien Chang 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 Innolux Corp and Lien Chang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innolux Corp and Lien Chang Electronic, you can compare the effects of market volatilities on Innolux Corp and Lien Chang 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 Innolux Corp with a short position of Lien Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innolux Corp and Lien Chang.
Diversification Opportunities for Innolux Corp and Lien Chang
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Innolux and Lien is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Innolux Corp and Lien Chang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Chang Electronic and Innolux Corp 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 Innolux Corp are associated (or correlated) with Lien Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Chang Electronic has no effect on the direction of Innolux Corp i.e., Innolux Corp and Lien Chang go up and down completely randomly.
Pair Corralation between Innolux Corp and Lien Chang
Assuming the 90 days trading horizon Innolux Corp is expected to generate 0.4 times more return on investment than Lien Chang. However, Innolux Corp is 2.51 times less risky than Lien Chang. It trades about 0.08 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about -0.21 per unit of risk. If you would invest 1,540 in Innolux Corp on September 13, 2024 and sell it today you would earn a total of 35.00 from holding Innolux Corp or generate 2.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Innolux Corp vs. Lien Chang Electronic
Performance |
| Timeline |
| Innolux Corp |
| Lien Chang Electronic |
Innolux Corp and Lien Chang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innolux Corp and Lien Chang
The main advantage of trading using opposite Innolux Corp and Lien Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innolux Corp position performs unexpectedly, Lien Chang 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 Lien Chang will offset losses from the drop in Lien Chang's long position.| Innolux Corp vs. AU Optronics | Innolux Corp vs. China Steel Corp | Innolux Corp vs. Hon Hai Precision | Innolux Corp vs. Delta Electronics |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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