Correlation Between Kao Fong and Lihtai Construction
Can any of the company-specific risk be diversified away by investing in both Kao Fong 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 Kao Fong and Lihtai Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kao Fong Machinery and Lihtai Construction Enterprise, you can compare the effects of market volatilities on Kao Fong 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 Kao Fong with a short position of Lihtai Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kao Fong and Lihtai Construction.
Diversification Opportunities for Kao Fong and Lihtai Construction
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kao and Lihtai is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kao Fong Machinery and Lihtai Construction Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lihtai Construction and Kao Fong 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 Kao Fong Machinery 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 Kao Fong i.e., Kao Fong and Lihtai Construction go up and down completely randomly.
Pair Corralation between Kao Fong and Lihtai Construction
Assuming the 90 days trading horizon Kao Fong Machinery is expected to under-perform the Lihtai Construction. In addition to that, Kao Fong is 10.16 times more volatile than Lihtai Construction Enterprise. It trades about -0.2 of its total potential returns per unit of risk. Lihtai Construction Enterprise is currently generating about -0.18 per unit of volatility. If you would invest 8,230 in Lihtai Construction Enterprise on October 23, 2024 and sell it today you would lose (100.00) from holding Lihtai Construction Enterprise or give up 1.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kao Fong Machinery vs. Lihtai Construction Enterprise
Performance |
| Timeline |
| Kao Fong Machinery |
| Lihtai Construction |
Kao Fong and Lihtai Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kao Fong and Lihtai Construction
The main advantage of trading using opposite Kao Fong and Lihtai Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kao Fong 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.| Kao Fong vs. Chia Yi Steel | Kao Fong vs. Century Iron And | Kao Fong vs. Healthconn Corp | Kao Fong vs. Chung Hung Steel |
| Lihtai Construction vs. Ibase Gaming | Lihtai Construction vs. DingZing Advanced Materials | Lihtai Construction vs. International Games System | Lihtai Construction vs. Golden Biotechnology |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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