Correlation Between Li Kang and Chi Hua
Can any of the company-specific risk be diversified away by investing in both Li Kang and Chi Hua 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 Chi Hua 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 Chi Hua Fitness, you can compare the effects of market volatilities on Li Kang and Chi Hua 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 Chi Hua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Kang and Chi Hua.
Diversification Opportunities for Li Kang and Chi Hua
Poor diversification
The 3 months correlation between 6242 and Chi is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Li Kang Biomedical and Chi Hua Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Hua Fitness 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 Chi Hua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Hua Fitness has no effect on the direction of Li Kang i.e., Li Kang and Chi Hua go up and down completely randomly.
Pair Corralation between Li Kang and Chi Hua
Assuming the 90 days trading horizon Li Kang Biomedical is expected to generate 1.25 times more return on investment than Chi Hua. However, Li Kang is 1.25 times more volatile than Chi Hua Fitness. It trades about -0.06 of its potential returns per unit of risk. Chi Hua Fitness is currently generating about -0.36 per unit of risk. If you would invest 4,320 in Li Kang Biomedical on October 11, 2024 and sell it today you would lose (60.00) from holding Li Kang Biomedical or give up 1.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Li Kang Biomedical vs. Chi Hua Fitness
Performance |
| Timeline |
| Li Kang Biomedical |
| Chi Hua Fitness |
Li Kang and Chi Hua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Kang and Chi Hua
The main advantage of trading using opposite Li Kang and Chi Hua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Kang position performs unexpectedly, Chi Hua 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 Chi Hua will offset losses from the drop in Chi Hua's long position.| Li Kang vs. RiTdisplay Corp | Li Kang vs. Chernan Metal Industrial | Li Kang vs. Grand Ocean Retail | Li Kang vs. Asia Metal Industries |
| Chi Hua vs. Jentech Precision Industrial | Chi Hua vs. Yi Jinn Industrial | Chi Hua vs. Tex Ray Industrial Co | Chi Hua vs. Fu Burg Industrial |
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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