Correlation Between Lian Hwa and Roo Hsing

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

Diversification Opportunities for Lian Hwa and Roo Hsing

0.35

Correlation Coefficient

Lian Hwa  Roo Hsing

Weak diversification

The 3 months correlation between Lian and Roo is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and Roo Hsing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roo Hsing 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 Roo Hsing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roo Hsing has no effect on the direction of Lian Hwa i.e., Lian Hwa and Roo Hsing go up and down completely randomly.

Pair Corralation between Lian Hwa and Roo Hsing

Assuming the 90 days trading horizon Lian Hwa is expected to generate 3.68 times less return on investment than Roo Hsing. In addition to that, Lian Hwa is 1.4 times more volatile than Roo Hsing Co. It trades about 0.04 of its total potential returns per unit of risk. Roo Hsing Co is currently generating about 0.2 per unit of volatility. If you would invest  309.00  in Roo Hsing Co on December 20, 2024 and sell it today you would earn a total of  77.00  from holding Roo Hsing Co or generate 24.92% 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.  Roo Hsing 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 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lian Hwa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Roo Hsing

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roo Hsing Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Roo Hsing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lian Hwa and Roo Hsing

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

The idea behind Lian Hwa Foods and Roo Hsing 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.