Correlation Between Ford and Lien Chang
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Lien Chang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Lien Chang Electronic, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Lien Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Lien Chang.
Diversification Opportunities for Ford and Lien Chang
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Lien is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Lien Chang go up and down completely randomly.
Pair Corralation between Ford and Lien Chang
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.48 times more return on investment than Lien Chang. However, Ford Motor is 2.1 times less risky than Lien Chang. It trades about 0.25 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about -0.16 per unit of risk. If you would invest 1,008 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 105.00 from holding Ford Motor or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Lien Chang Electronic
Performance |
| Timeline |
| Ford Motor |
| Lien Chang Electronic |
Ford and Lien Chang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Lien Chang
The main advantage of trading using opposite Ford and Lien Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| Lien Chang vs. Hitron Technologies | Lien Chang vs. Universal Microelectronics Co | Lien Chang vs. Pan International Industrial Corp | Lien Chang vs. Sunonwealth Electric Machine |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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