Correlation Between Lian Hwa and AVer Information

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

Diversification Opportunities for Lian Hwa and AVer Information

0.27

Correlation Coefficient

Lian Hwa  AVer Information

Modest diversification

The 3 months correlation between Lian and AVer is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and AVer Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVer Information 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 AVer Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVer Information has no effect on the direction of Lian Hwa i.e., Lian Hwa and AVer Information go up and down completely randomly.

Pair Corralation between Lian Hwa and AVer Information

Assuming the 90 days trading horizon Lian Hwa Foods is expected to generate 2.25 times more return on investment than AVer Information. However, Lian Hwa is 2.25 times more volatile than AVer Information. It trades about 0.03 of its potential returns per unit of risk. AVer Information is currently generating about -0.11 per unit of risk. If you would invest  13,200  in Lian Hwa Foods on December 26, 2024 and sell it today you would earn a total of  250.00  from holding Lian Hwa Foods or generate 1.89% return on investment over 90 days.

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

Lian Hwa Foods  vs.  AVer Information

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 2 (%) 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.

AVer Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days AVer Information has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Lian Hwa and AVer Information

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

The idea behind Lian Hwa Foods and AVer Information 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.