Correlation Between Lian Hwa and Maywufa

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

Diversification Opportunities for Lian Hwa and Maywufa

0.08

Correlation Coefficient

Lian Hwa  Maywufa

Significant diversification

The 3 months correlation between Lian and Maywufa is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and Maywufa Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maywufa 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 Maywufa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maywufa has no effect on the direction of Lian Hwa i.e., Lian Hwa and Maywufa go up and down completely randomly.

Pair Corralation between Lian Hwa and Maywufa

Assuming the 90 days trading horizon Lian Hwa is expected to generate 1.71 times less return on investment than Maywufa. In addition to that, Lian Hwa is 4.86 times more volatile than Maywufa Co. It trades about 0.02 of its total potential returns per unit of risk. Maywufa Co is currently generating about 0.16 per unit of volatility. If you would invest  2,275  in Maywufa Co on December 22, 2024 and sell it today you would earn a total of  130.00  from holding Maywufa Co or generate 5.71% return on investment over 90 days.

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

Lian Hwa Foods  vs.  Maywufa Co

Lian Hwa Foods

Risk-Adjusted Performance

Weak

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

Maywufa

Risk-Adjusted Performance

Good

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

Pair Trading with Lian Hwa and Maywufa

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

The idea behind Lian Hwa Foods and Maywufa Co 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.