Correlation Between Chung Hwa and Lian Hwa
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Lian 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 Lian 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 Lian Hwa Foods, you can compare the effects of market volatilities on Chung Hwa and Lian 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 Lian Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Lian Hwa.
Diversification Opportunities for Chung Hwa and Lian Hwa
Pay attention - limited upside
The 3 months correlation between Chung and Lian is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Food and Lian Hwa Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lian Hwa Foods 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 Lian Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lian Hwa Foods has no effect on the direction of Chung Hwa i.e., Chung Hwa and Lian Hwa go up and down completely randomly.
Pair Corralation between Chung Hwa and Lian Hwa
Assuming the 90 days trading horizon Chung Hwa Food is expected to under-perform the Lian Hwa. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hwa Food is 3.46 times less risky than Lian Hwa. The stock trades about -0.06 of its potential returns per unit of risk. The Lian Hwa Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 9,970 in Lian Hwa Foods on August 30, 2024 and sell it today you would earn a total of 2,030 from holding Lian Hwa Foods or generate 20.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hwa Food vs. Lian Hwa Foods
Performance |
| Timeline |
| Chung Hwa Food |
| Lian Hwa Foods |
Chung Hwa and Lian Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hwa and Lian Hwa
The main advantage of trading using opposite Chung Hwa and Lian Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, Lian 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 Lian Hwa will offset losses from the drop in Lian Hwa's long position.| Chung Hwa vs. Uni President Enterprises Corp | Chung Hwa vs. Tingyi Holding Corp | Chung Hwa vs. Lien Hwa Industrial | Chung Hwa vs. Great Wall Enterprise |
| Lian Hwa vs. Lien Hwa Industrial | Lian Hwa vs. Charoen Pokphand Enterprise | Lian Hwa vs. Great Wall Enterprise | Lian 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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