Correlation Between Chung Hwa and Lien Hwa
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Lien 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 Chung Hwa and Lien Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hwa Food and Lien Hwa Industrial, you can compare the effects of market volatilities on Chung Hwa and Lien 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 Chung Hwa with a short position of Lien Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Lien Hwa.
Diversification Opportunities for Chung Hwa and Lien Hwa
Poor diversification
The 3 months correlation between Chung and Lien is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Food and Lien Hwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Hwa Industrial and Chung Hwa 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 Chung Hwa Food are associated (or correlated) with Lien Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Hwa Industrial has no effect on the direction of Chung Hwa i.e., Chung Hwa and Lien Hwa go up and down completely randomly.
Pair Corralation between Chung Hwa and Lien Hwa
Assuming the 90 days trading horizon Chung Hwa Food is expected to generate 0.41 times more return on investment than Lien Hwa. However, Chung Hwa Food is 2.43 times less risky than Lien Hwa. It trades about -0.08 of its potential returns per unit of risk. Lien Hwa Industrial is currently generating about -0.07 per unit of risk. If you would invest 9,343 in Chung Hwa Food on September 3, 2024 and sell it today you would lose (543.00) from holding Chung Hwa Food or give up 5.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hwa Food vs. Lien Hwa Industrial
Performance |
| Timeline |
| Chung Hwa Food |
| Lien Hwa Industrial |
Chung Hwa and Lien Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hwa and Lien Hwa
The main advantage of trading using opposite Chung Hwa and Lien Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, Lien 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 Lien Hwa will offset losses from the drop in Lien Hwa's long position.| Chung Hwa vs. Uni President Enterprises Corp | Chung Hwa vs. Lien Hwa Industrial | Chung Hwa vs. Great Wall Enterprise | Chung Hwa vs. Standard Foods Corp |
| Lien Hwa vs. Great Wall Enterprise | Lien Hwa vs. Lian Hwa Foods | Lien Hwa vs. Charoen Pokphand Enterprise | Lien Hwa vs. Uni President Enterprises Corp |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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