Correlation Between Lihtai Construction and Ruentex Engineering
Can any of the company-specific risk be diversified away by investing in both Lihtai Construction and Ruentex Engineering 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 Ruentex Engineering 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 Ruentex Engineering Construction, you can compare the effects of market volatilities on Lihtai Construction and Ruentex Engineering 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 Ruentex Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lihtai Construction and Ruentex Engineering.
Diversification Opportunities for Lihtai Construction and Ruentex Engineering
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lihtai and Ruentex is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lihtai Construction Enterprise and Ruentex Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Engineering 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 Ruentex Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Engineering has no effect on the direction of Lihtai Construction i.e., Lihtai Construction and Ruentex Engineering go up and down completely randomly.
Pair Corralation between Lihtai Construction and Ruentex Engineering
Assuming the 90 days trading horizon Lihtai Construction is expected to generate 5.59 times less return on investment than Ruentex Engineering. But when comparing it to its historical volatility, Lihtai Construction Enterprise is 2.89 times less risky than Ruentex Engineering. It trades about 0.12 of its potential returns per unit of risk. Ruentex Engineering Construction is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 13,350 in Ruentex Engineering Construction on September 1, 2024 and sell it today you would earn a total of 950.00 from holding Ruentex Engineering Construction or generate 7.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lihtai Construction Enterprise vs. Ruentex Engineering Constructi
Performance |
| Timeline |
| Lihtai Construction |
| Ruentex Engineering |
Lihtai Construction and Ruentex Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lihtai Construction and Ruentex Engineering
The main advantage of trading using opposite Lihtai Construction and Ruentex Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lihtai Construction position performs unexpectedly, Ruentex Engineering 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 Ruentex Engineering will offset losses from the drop in Ruentex Engineering's long position.| Lihtai Construction vs. Taiwan Cement Corp | Lihtai Construction vs. Asia Cement Corp | Lihtai Construction vs. Goldsun Building Materials | Lihtai Construction vs. Universal Cement Corp |
| Ruentex Engineering vs. Ruentex Industries | Ruentex Engineering vs. Huaku Development Co | Ruentex Engineering vs. Ruentex Development Co | Ruentex Engineering vs. Highwealth Construction 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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