Correlation Between Excellence Optoelectronic and Lien Chang
Can any of the company-specific risk be diversified away by investing in both Excellence Optoelectronic and Lien Chang 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 Excellence Optoelectronic and Lien Chang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Excellence Optoelectronic and Lien Chang Electronic, you can compare the effects of market volatilities on Excellence Optoelectronic and Lien Chang 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 Excellence Optoelectronic with a short position of Lien Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Excellence Optoelectronic and Lien Chang.
Diversification Opportunities for Excellence Optoelectronic and Lien Chang
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Excellence and Lien is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Excellence Optoelectronic and Lien Chang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Chang Electronic and Excellence Optoelectronic 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 Excellence Optoelectronic are associated (or correlated) with Lien Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Chang Electronic has no effect on the direction of Excellence Optoelectronic i.e., Excellence Optoelectronic and Lien Chang go up and down completely randomly.
Pair Corralation between Excellence Optoelectronic and Lien Chang
Assuming the 90 days trading horizon Excellence Optoelectronic is expected to generate 0.87 times more return on investment than Lien Chang. However, Excellence Optoelectronic is 1.14 times less risky than Lien Chang. It trades about -0.16 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about -0.2 per unit of risk. If you would invest 3,180 in Excellence Optoelectronic on September 12, 2024 and sell it today you would lose (375.00) from holding Excellence Optoelectronic or give up 11.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Excellence Optoelectronic vs. Lien Chang Electronic
Performance |
| Timeline |
| Excellence Optoelectronic |
| Lien Chang Electronic |
Excellence Optoelectronic and Lien Chang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Excellence Optoelectronic and Lien Chang
The main advantage of trading using opposite Excellence Optoelectronic and Lien Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Excellence Optoelectronic position performs unexpectedly, Lien Chang 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 Chang will offset losses from the drop in Lien Chang's long position.The idea behind Excellence Optoelectronic and Lien Chang Electronic 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.
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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