Correlation Between Pou Chen and Lily Textile
Can any of the company-specific risk be diversified away by investing in both Pou Chen and Lily Textile 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 Pou Chen and Lily Textile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pou Chen Corp and Lily Textile Co, you can compare the effects of market volatilities on Pou Chen and Lily Textile 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 Pou Chen with a short position of Lily Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pou Chen and Lily Textile.
Diversification Opportunities for Pou Chen and Lily Textile
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pou and Lily is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pou Chen Corp and Lily Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lily Textile and Pou Chen 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 Pou Chen Corp are associated (or correlated) with Lily Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lily Textile has no effect on the direction of Pou Chen i.e., Pou Chen and Lily Textile go up and down completely randomly.
Pair Corralation between Pou Chen and Lily Textile
Assuming the 90 days trading horizon Pou Chen Corp is expected to generate 1.44 times more return on investment than Lily Textile. However, Pou Chen is 1.44 times more volatile than Lily Textile Co. It trades about 0.19 of its potential returns per unit of risk. Lily Textile Co is currently generating about -0.1 per unit of risk. If you would invest 3,780 in Pou Chen Corp on September 1, 2024 and sell it today you would earn a total of 300.00 from holding Pou Chen Corp or generate 7.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Pou Chen Corp vs. Lily Textile Co
Performance |
| Timeline |
| Pou Chen Corp |
| Lily Textile |
Pou Chen and Lily Textile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pou Chen and Lily Textile
The main advantage of trading using opposite Pou Chen and Lily Textile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pou Chen position performs unexpectedly, Lily Textile 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 Lily Textile will offset losses from the drop in Lily Textile's long position.| Pou Chen vs. Uni President Enterprises Corp | Pou Chen vs. Cheng Shin Rubber | Pou Chen vs. Far Eastern New | Pou Chen vs. Formosa Chemicals Fibre |
| Lily Textile vs. Chaintech Technology Corp | Lily Textile vs. AVerMedia Technologies | Lily Textile vs. Avision | Lily Textile vs. Clevo Co |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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