Correlation Between Lien Hwa and TTET Union

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

By analyzing existing cross correlation between Lien Hwa Industrial and TTET Union Corp, you can compare the effects of market volatilities on Lien Hwa and TTET Union 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 Lien Hwa with a short position of TTET Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lien Hwa and TTET Union.

Diversification Opportunities for Lien Hwa and TTET Union

0.4

Correlation Coefficient

Lien Hwa  TTET Union

Very weak diversification

The 3 months correlation between Lien and TTET is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Lien Hwa Industrial and TTET Union Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTET Union Corp and Lien 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 Lien Hwa Industrial are associated (or correlated) with TTET Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTET Union Corp has no effect on the direction of Lien Hwa i.e., Lien Hwa and TTET Union go up and down completely randomly.

Pair Corralation between Lien Hwa and TTET Union

Assuming the 90 days trading horizon Lien Hwa Industrial is expected to under-perform the TTET Union. But the stock apears to be less risky and, when comparing its historical volatility, Lien Hwa Industrial is 1.52 times less risky than TTET Union. The stock trades about -0.08 of its potential returns per unit of risk. The TTET Union Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14,400  in TTET Union Corp on September 4, 2024 and sell it today you would earn a total of  150.00  from holding TTET Union Corp or generate 1.04% return on investment over 90 days.

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

Lien Hwa Industrial  vs.  TTET Union Corp

Lien Hwa Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lien Hwa Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lien Hwa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

TTET Union Corp

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Lien Hwa and TTET Union

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

The idea behind Lien Hwa Industrial and TTET Union Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.