Correlation Between Lien Hwa and Mospec Semiconductor

Can any of the company-specific risk be diversified away by investing in both Lien Hwa and Mospec Semiconductor 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 Mospec Semiconductor 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 Mospec Semiconductor Corp, you can compare the effects of market volatilities on Lien Hwa and Mospec Semiconductor 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 Mospec Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lien Hwa and Mospec Semiconductor.

Diversification Opportunities for Lien Hwa and Mospec Semiconductor

0.63

Correlation Coefficient

Lien Hwa  Mospec Semiconductor

Poor diversification

The 3 months correlation between Lien and Mospec is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lien Hwa Industrial and Mospec Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mospec Semiconductor 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 Mospec Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mospec Semiconductor Corp has no effect on the direction of Lien Hwa i.e., Lien Hwa and Mospec Semiconductor go up and down completely randomly.

Pair Corralation between Lien Hwa and Mospec Semiconductor

Assuming the 90 days trading horizon Lien Hwa Industrial is expected to under-perform the Mospec Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Lien Hwa Industrial is 1.4 times less risky than Mospec Semiconductor. The stock trades about -0.13 of its potential returns per unit of risk. The Mospec Semiconductor Corp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,260  in Mospec Semiconductor Corp on September 16, 2024 and sell it today you would lose (130.00) from holding Mospec Semiconductor Corp or give up 3.99% of portfolio value over 90 days.

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

Lien Hwa Industrial  vs.  Mospec Semiconductor 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.

Mospec Semiconductor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mospec Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mospec Semiconductor 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 Mospec Semiconductor

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

The idea behind Lien Hwa Industrial and Mospec Semiconductor 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 Commodity Directory module to find actively traded commodities issued by global exchanges.