Correlation Between Century Iron and Lian Hwa
Can any of the company-specific risk be diversified away by investing in both Century Iron 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 Century Iron and Lian Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Iron And and Lian Hwa Foods, you can compare the effects of market volatilities on Century Iron 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 Century Iron with a short position of Lian Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Iron and Lian Hwa.
Diversification Opportunities for Century Iron and Lian Hwa
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Century and Lian is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Century Iron And 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 Century Iron 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 Century Iron And 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 Century Iron i.e., Century Iron and Lian Hwa go up and down completely randomly.
Pair Corralation between Century Iron and Lian Hwa
Assuming the 90 days trading horizon Century Iron is expected to generate 2.89 times less return on investment than Lian Hwa. In addition to that, Century Iron is 2.28 times more volatile than Lian Hwa Foods. It trades about 0.02 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 8,820 in Lian Hwa Foods on September 14, 2024 and sell it today you would earn a total of 4,030 from holding Lian Hwa Foods or generate 45.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Iron And vs. Lian Hwa Foods
Performance |
| Timeline |
| Century Iron And |
| Lian Hwa Foods |
Century Iron and Lian Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Iron and Lian Hwa
The main advantage of trading using opposite Century Iron and Lian Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Iron 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.| Century Iron vs. Tainan Spinning Co | Century Iron vs. Lealea Enterprise Co | Century Iron vs. China Petrochemical Development | Century Iron vs. Ruentex Development Co |
| Lian Hwa vs. Standard Foods Corp | Lian Hwa vs. Uni President Enterprises Corp | Lian Hwa vs. Great Wall Enterprise | Lian Hwa vs. Ruentex Development 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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