Correlation Between Chailease Holding and Lien Hwa
Can any of the company-specific risk be diversified away by investing in both Chailease Holding and Lien Hwa 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 Chailease Holding and Lien Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chailease Holding Co and Lien Hwa Industrial, you can compare the effects of market volatilities on Chailease Holding and Lien Hwa 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 Chailease Holding with a short position of Lien Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chailease Holding and Lien Hwa.
Diversification Opportunities for Chailease Holding and Lien Hwa
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chailease and Lien is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Chailease Holding Co and Lien Hwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Hwa Industrial and Chailease Holding 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 Chailease Holding Co are associated (or correlated) with Lien Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Hwa Industrial has no effect on the direction of Chailease Holding i.e., Chailease Holding and Lien Hwa go up and down completely randomly.
Pair Corralation between Chailease Holding and Lien Hwa
Assuming the 90 days trading horizon Chailease Holding Co is expected to under-perform the Lien Hwa. In addition to that, Chailease Holding is 2.96 times more volatile than Lien Hwa Industrial. It trades about -0.12 of its total potential returns per unit of risk. Lien Hwa Industrial is currently generating about -0.12 per unit of volatility. If you would invest 6,230 in Lien Hwa Industrial on September 2, 2024 and sell it today you would lose (370.00) from holding Lien Hwa Industrial or give up 5.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chailease Holding Co vs. Lien Hwa Industrial
Performance |
| Timeline |
| Chailease Holding |
| Lien Hwa Industrial |
Chailease Holding and Lien Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chailease Holding and Lien Hwa
The main advantage of trading using opposite Chailease Holding and Lien Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chailease Holding position performs unexpectedly, Lien Hwa 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 Lien Hwa will offset losses from the drop in Lien Hwa's long position.The idea behind Chailease Holding Co and Lien Hwa Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Lien Hwa vs. Great Wall Enterprise | Lien Hwa vs. Lian Hwa Foods | Lien Hwa vs. Charoen Pokphand Enterprise | Lien Hwa vs. Uni President Enterprises 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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