Correlation Between Lihtai Construction and Shieh Yih
Can any of the company-specific risk be diversified away by investing in both Lihtai Construction and Shieh Yih 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 Shieh Yih 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 Shieh Yih Machinery, you can compare the effects of market volatilities on Lihtai Construction and Shieh Yih 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 Shieh Yih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lihtai Construction and Shieh Yih.
Diversification Opportunities for Lihtai Construction and Shieh Yih
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lihtai and Shieh is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lihtai Construction Enterprise and Shieh Yih Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shieh Yih Machinery 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 Shieh Yih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shieh Yih Machinery has no effect on the direction of Lihtai Construction i.e., Lihtai Construction and Shieh Yih go up and down completely randomly.
Pair Corralation between Lihtai Construction and Shieh Yih
Assuming the 90 days trading horizon Lihtai Construction is expected to generate 3.11 times less return on investment than Shieh Yih. But when comparing it to its historical volatility, Lihtai Construction Enterprise is 3.21 times less risky than Shieh Yih. It trades about 0.27 of its potential returns per unit of risk. Shieh Yih Machinery is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,370 in Shieh Yih Machinery on December 8, 2024 and sell it today you would earn a total of 485.00 from holding Shieh Yih Machinery or generate 14.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lihtai Construction Enterprise vs. Shieh Yih Machinery
Performance |
| Timeline |
| Lihtai Construction |
| Shieh Yih Machinery |
Lihtai Construction and Shieh Yih Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lihtai Construction and Shieh Yih
The main advantage of trading using opposite Lihtai Construction and Shieh Yih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lihtai Construction position performs unexpectedly, Shieh Yih 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 Shieh Yih will offset losses from the drop in Shieh Yih's long position.| Lihtai Construction vs. Prime Oil Chemical | ||
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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