Correlation Between Li Kang and Taiwan IC
Can any of the company-specific risk be diversified away by investing in both Li Kang and Taiwan IC 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 Taiwan IC 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 Taiwan IC Packaging, you can compare the effects of market volatilities on Li Kang and Taiwan IC 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 Taiwan IC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Kang and Taiwan IC.
Diversification Opportunities for Li Kang and Taiwan IC
Very weak diversification
The 3 months correlation between 6242 and Taiwan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Li Kang Biomedical and Taiwan IC Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan IC Packaging 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 Taiwan IC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan IC Packaging has no effect on the direction of Li Kang i.e., Li Kang and Taiwan IC go up and down completely randomly.
Pair Corralation between Li Kang and Taiwan IC
Assuming the 90 days trading horizon Li Kang Biomedical is expected to generate 0.54 times more return on investment than Taiwan IC. However, Li Kang Biomedical is 1.85 times less risky than Taiwan IC. It trades about -0.06 of its potential returns per unit of risk. Taiwan IC Packaging is currently generating about -0.12 per unit of risk. If you would invest 4,874 in Li Kang Biomedical on September 3, 2024 and sell it today you would lose (489.00) from holding Li Kang Biomedical or give up 10.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Li Kang Biomedical vs. Taiwan IC Packaging
Performance |
| Timeline |
| Li Kang Biomedical |
| Taiwan IC Packaging |
Li Kang and Taiwan IC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Kang and Taiwan IC
The main advantage of trading using opposite Li Kang and Taiwan IC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Kang position performs unexpectedly, Taiwan IC 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 Taiwan IC will offset losses from the drop in Taiwan IC's long position.| Li Kang vs. TTET Union Corp | Li Kang vs. Uni President Enterprises Corp | Li Kang vs. Charoen Pokphand Enterprise |
| Taiwan IC vs. Taiwan Cooperative Financial | Taiwan IC vs. PChome Online | Taiwan IC vs. Cleanaway Co | Taiwan IC vs. Central Reinsurance 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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