Correlation Between Lihtai Construction and New Asia
Can any of the company-specific risk be diversified away by investing in both Lihtai Construction and New Asia 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 Lihtai Construction and New Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lihtai Construction Enterprise and New Asia Construction, you can compare the effects of market volatilities on Lihtai Construction and New Asia 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 Lihtai Construction with a short position of New Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lihtai Construction and New Asia.
Diversification Opportunities for Lihtai Construction and New Asia
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lihtai and New is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lihtai Construction Enterprise and New Asia Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Asia Construction and Lihtai Construction 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 Lihtai Construction Enterprise are associated (or correlated) with New Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Asia Construction has no effect on the direction of Lihtai Construction i.e., Lihtai Construction and New Asia go up and down completely randomly.
Pair Corralation between Lihtai Construction and New Asia
Assuming the 90 days trading horizon Lihtai Construction Enterprise is expected to under-perform the New Asia. But the stock apears to be less risky and, when comparing its historical volatility, Lihtai Construction Enterprise is 13.91 times less risky than New Asia. The stock trades about -0.18 of its potential returns per unit of risk. The New Asia Construction is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 1,240 in New Asia Construction on October 23, 2024 and sell it today you would earn a total of 540.00 from holding New Asia Construction or generate 43.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lihtai Construction Enterprise vs. New Asia Construction
Performance |
| Timeline |
| Lihtai Construction |
| New Asia Construction |
Lihtai Construction and New Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lihtai Construction and New Asia
The main advantage of trading using opposite Lihtai Construction and New Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lihtai Construction position performs unexpectedly, New Asia 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 New Asia will offset losses from the drop in New Asia's long position.| Lihtai Construction vs. Ibase Gaming | Lihtai Construction vs. DingZing Advanced Materials | Lihtai Construction vs. International Games System | Lihtai Construction vs. Golden Biotechnology |
| New Asia vs. BES Engineering Co | New Asia vs. Delpha Construction Co | New Asia vs. Cathay Real Estate | New Asia vs. Da Cin Construction Co |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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