Correlation Between Lifestyle Global and Tong Hwa
Can any of the company-specific risk be diversified away by investing in both Lifestyle Global and Tong 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 Lifestyle Global and Tong Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifestyle Global Enterprise and Tong Hwa Synthetic Fiber, you can compare the effects of market volatilities on Lifestyle Global and Tong 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 Lifestyle Global with a short position of Tong Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifestyle Global and Tong Hwa.
Diversification Opportunities for Lifestyle Global and Tong Hwa
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lifestyle and Tong is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lifestyle Global Enterprise and Tong Hwa Synthetic Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tong Hwa Synthetic and Lifestyle Global 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 Lifestyle Global Enterprise are associated (or correlated) with Tong Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tong Hwa Synthetic has no effect on the direction of Lifestyle Global i.e., Lifestyle Global and Tong Hwa go up and down completely randomly.
Pair Corralation between Lifestyle Global and Tong Hwa
Assuming the 90 days trading horizon Lifestyle Global Enterprise is expected to under-perform the Tong Hwa. But the stock apears to be less risky and, when comparing its historical volatility, Lifestyle Global Enterprise is 2.5 times less risky than Tong Hwa. The stock trades about -0.21 of its potential returns per unit of risk. The Tong Hwa Synthetic Fiber is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2,945 in Tong Hwa Synthetic Fiber on November 6, 2024 and sell it today you would lose (160.00) from holding Tong Hwa Synthetic Fiber or give up 5.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifestyle Global Enterprise vs. Tong Hwa Synthetic Fiber
Performance |
| Timeline |
| Lifestyle Global Ent |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Tong Hwa Synthetic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Lifestyle Global and Tong Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifestyle Global and Tong Hwa
The main advantage of trading using opposite Lifestyle Global and Tong Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifestyle Global position performs unexpectedly, Tong 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 Tong Hwa will offset losses from the drop in Tong Hwa's long position.The idea behind Lifestyle Global Enterprise and Tong Hwa Synthetic Fiber 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.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |