Correlation Between Information Technology and Lian Hwa
Can any of the company-specific risk be diversified away by investing in both Information Technology and Lian 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 Information Technology and Lian Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Information Technology Total and Lian Hwa Foods, you can compare the effects of market volatilities on Information Technology and Lian 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 Information Technology with a short position of Lian Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and Lian Hwa.
Diversification Opportunities for Information Technology and Lian Hwa
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Information and Lian is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and Lian Hwa Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lian Hwa Foods and Information Technology 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 Information Technology Total are associated (or correlated) with Lian Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lian Hwa Foods has no effect on the direction of Information Technology i.e., Information Technology and Lian Hwa go up and down completely randomly.
Pair Corralation between Information Technology and Lian Hwa
Assuming the 90 days trading horizon Information Technology is expected to generate 1.78 times less return on investment than Lian Hwa. In addition to that, Information Technology is 2.06 times more volatile than Lian Hwa Foods. It trades about 0.03 of its total potential returns per unit of risk. Lian Hwa Foods is currently generating about 0.11 per unit of volatility. If you would invest 8,480 in Lian Hwa Foods on November 19, 2024 and sell it today you would earn a total of 8,220 from holding Lian Hwa Foods or generate 96.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Information Technology Total vs. Lian Hwa Foods
Performance |
| Timeline |
| Information Technology |
| Lian Hwa Foods |
Information Technology and Lian Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Information Technology and Lian Hwa
The main advantage of trading using opposite Information Technology and Lian Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Technology position performs unexpectedly, Lian 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 Lian Hwa will offset losses from the drop in Lian Hwa's long position.| Information Technology vs. WiseChip Semiconductor | Information Technology vs. Hannstar Display Corp | Information Technology vs. C Media Electronics | Information Technology vs. Sinopower Semiconductor |
| Lian Hwa vs. Lien Hwa Industrial | Lian Hwa vs. Charoen Pokphand Enterprise | Lian Hwa vs. Great Wall Enterprise | Lian 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Stocks Directory Find actively traded stocks across global markets |