Correlation Between Uni President and Li Kang

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

By analyzing existing cross correlation between Uni President Enterprises Corp and Li Kang Biomedical, you can compare the effects of market volatilities on Uni President and Li Kang 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 Uni President with a short position of Li Kang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uni President and Li Kang.

Diversification Opportunities for Uni President and Li Kang

0.78

Correlation Coefficient

Uni President  Li Kang

Poor diversification

The 3 months correlation between Uni and 6242 is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Uni President Enterprises Corp and Li Kang Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Kang Biomedical and Uni President 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 Uni President Enterprises Corp are associated (or correlated) with Li Kang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Kang Biomedical has no effect on the direction of Uni President i.e., Uni President and Li Kang go up and down completely randomly.

Pair Corralation between Uni President and Li Kang

Assuming the 90 days trading horizon Uni President is expected to generate 5.19 times less return on investment than Li Kang. But when comparing it to its historical volatility, Uni President Enterprises Corp is 1.64 times less risky than Li Kang. It trades about 0.01 of its potential returns per unit of risk. Li Kang Biomedical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,265  in Li Kang Biomedical on December 28, 2024 and sell it today you would earn a total of  145.00  from holding Li Kang Biomedical or generate 3.4% return on investment over 90 days.

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

Uni President Enterprises Corp  vs.  Li Kang Biomedical

Uni President Enterp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Uni President Enterprises Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Uni President is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Li Kang Biomedical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Li Kang Biomedical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Li Kang is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Uni President and Li Kang

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

The idea behind Uni President Enterprises Corp and Li Kang Biomedical 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.