Correlation Between Li Kang and De Licacy
Can any of the company-specific risk be diversified away by investing in both Li Kang and De Licacy 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 Li Kang and De Licacy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Kang Biomedical and De Licacy Industrial, you can compare the effects of market volatilities on Li Kang and De Licacy 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 Li Kang with a short position of De Licacy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Kang and De Licacy.
Diversification Opportunities for Li Kang and De Licacy
Good diversification
The 3 months correlation between 6242 and 1464 is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Li Kang Biomedical and De Licacy Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Licacy Industrial and Li Kang 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 Li Kang Biomedical are associated (or correlated) with De Licacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Licacy Industrial has no effect on the direction of Li Kang i.e., Li Kang and De Licacy go up and down completely randomly.
Pair Corralation between Li Kang and De Licacy
Assuming the 90 days trading horizon Li Kang Biomedical is expected to generate 1.48 times more return on investment than De Licacy. However, Li Kang is 1.48 times more volatile than De Licacy Industrial. It trades about 0.02 of its potential returns per unit of risk. De Licacy Industrial is currently generating about 0.02 per unit of risk. If you would invest 3,963 in Li Kang Biomedical on September 1, 2024 and sell it today you would earn a total of 337.00 from holding Li Kang Biomedical or generate 8.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Li Kang Biomedical vs. De Licacy Industrial
Performance |
| Timeline |
| Li Kang Biomedical |
| De Licacy Industrial |
Li Kang and De Licacy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Kang and De Licacy
The main advantage of trading using opposite Li Kang and De Licacy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Kang position performs unexpectedly, De Licacy 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 De Licacy will offset losses from the drop in De Licacy's long position.The idea behind Li Kang Biomedical and De Licacy 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.| De Licacy vs. Tainan Enterprises Co | De Licacy vs. Nien Hsing Textile | De Licacy vs. Wisher Industrial Co | De Licacy vs. Tex Ray Industrial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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