Correlation Between Lian Hwa and Progate

Can any of the company-specific risk be diversified away by investing in both Lian Hwa and Progate 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 Lian Hwa and Progate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lian Hwa Foods and Progate Group, you can compare the effects of market volatilities on Lian Hwa and Progate 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 Lian Hwa with a short position of Progate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lian Hwa and Progate.

Diversification Opportunities for Lian Hwa and Progate

-0.67

Correlation Coefficient

Lian Hwa  Progate

Excellent diversification

The 3 months correlation between Lian and Progate is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and Progate Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progate Group and Lian Hwa 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 Lian Hwa Foods are associated (or correlated) with Progate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Progate Group has no effect on the direction of Lian Hwa i.e., Lian Hwa and Progate go up and down completely randomly.

Pair Corralation between Lian Hwa and Progate

Assuming the 90 days trading horizon Lian Hwa Foods is expected to generate 0.45 times more return on investment than Progate. However, Lian Hwa Foods is 2.23 times less risky than Progate. It trades about 0.15 of its potential returns per unit of risk. Progate Group is currently generating about -0.12 per unit of risk. If you would invest  10,700  in Lian Hwa Foods on September 3, 2024 and sell it today you would earn a total of  1,250  from holding Lian Hwa Foods or generate 11.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Lian Hwa Foods  vs.  Progate Group

Lian Hwa Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lian Hwa Foods are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lian Hwa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Progate Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Progate Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lian Hwa and Progate

The main advantage of trading using opposite Lian Hwa and Progate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lian Hwa position performs unexpectedly, Progate 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 Progate will offset losses from the drop in Progate's long position.

The idea behind Lian Hwa Foods and Progate Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.