Correlation Between Nan Liu and Luo Lih
Can any of the company-specific risk be diversified away by investing in both Nan Liu and Luo Lih 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 Nan Liu and Luo Lih into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nan Liu Enterprise and Luo Lih Fen, you can compare the effects of market volatilities on Nan Liu and Luo Lih 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 Nan Liu with a short position of Luo Lih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Liu and Luo Lih.
Diversification Opportunities for Nan Liu and Luo Lih
Poor diversification
The 3 months correlation between Nan and Luo is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nan Liu Enterprise and Luo Lih Fen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luo Lih Fen and Nan Liu 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 Nan Liu Enterprise are associated (or correlated) with Luo Lih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luo Lih Fen has no effect on the direction of Nan Liu i.e., Nan Liu and Luo Lih go up and down completely randomly.
Pair Corralation between Nan Liu and Luo Lih
Assuming the 90 days trading horizon Nan Liu Enterprise is expected to generate 0.48 times more return on investment than Luo Lih. However, Nan Liu Enterprise is 2.07 times less risky than Luo Lih. It trades about -0.17 of its potential returns per unit of risk. Luo Lih Fen is currently generating about -0.11 per unit of risk. If you would invest 7,060 in Nan Liu Enterprise on September 24, 2024 and sell it today you would lose (730.00) from holding Nan Liu Enterprise or give up 10.34% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Nan Liu Enterprise vs. Luo Lih Fen
Performance |
Timeline |
Nan Liu Enterprise |
Luo Lih Fen |
Nan Liu and Luo Lih Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nan Liu and Luo Lih
The main advantage of trading using opposite Nan Liu and Luo Lih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Liu position performs unexpectedly, Luo Lih 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 Luo Lih will offset losses from the drop in Luo Lih's long position.Nan Liu vs. Merida Industry Co | Nan Liu vs. Cheng Shin Rubber | Nan Liu vs. Uni President Enterprises Corp | Nan Liu vs. Pou Chen Corp |
Luo Lih vs. Chlitina Holding | Luo Lih vs. Taiyen Biotech Co | Luo Lih vs. Nan Liu Enterprise | Luo Lih vs. DRWu Skincare 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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