Correlation Between Chung Hwa and Lihtai Construction
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Lihtai Construction 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 Lihtai Construction 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 Lihtai Construction Enterprise, you can compare the effects of market volatilities on Chung Hwa and Lihtai Construction 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 Lihtai Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Lihtai Construction.
Diversification Opportunities for Chung Hwa and Lihtai Construction
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chung and Lihtai is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Food and Lihtai Construction Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lihtai Construction 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 Lihtai Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lihtai Construction has no effect on the direction of Chung Hwa i.e., Chung Hwa and Lihtai Construction go up and down completely randomly.
Pair Corralation between Chung Hwa and Lihtai Construction
Assuming the 90 days trading horizon Chung Hwa is expected to generate 2.87 times less return on investment than Lihtai Construction. But when comparing it to its historical volatility, Chung Hwa Food is 2.03 times less risky than Lihtai Construction. It trades about 0.08 of its potential returns per unit of risk. Lihtai Construction Enterprise is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 8,060 in Lihtai Construction Enterprise on August 30, 2024 and sell it today you would earn a total of 100.00 from holding Lihtai Construction Enterprise or generate 1.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Chung Hwa Food vs. Lihtai Construction Enterprise
Performance |
| Timeline |
| Chung Hwa Food |
| Lihtai Construction |
Chung Hwa and Lihtai Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hwa and Lihtai Construction
The main advantage of trading using opposite Chung Hwa and Lihtai Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, Lihtai Construction 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 Lihtai Construction will offset losses from the drop in Lihtai Construction'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 |
| Lihtai Construction vs. Hi Lai Foods Co | Lihtai Construction vs. Chung Hwa Food | Lihtai Construction vs. United Radiant Technology | Lihtai Construction vs. Lian Hwa Foods |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |