Correlation Between An Shin and Lien Chang

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

By analyzing existing cross correlation between An Shin Food Services and Lien Chang Electronic, you can compare the effects of market volatilities on An Shin and Lien Chang 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 An Shin with a short position of Lien Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of An Shin and Lien Chang.

Diversification Opportunities for An Shin and Lien Chang

0.08

Correlation Coefficient

An Shin  Lien Chang

Significant diversification

The 3 months correlation between 1259 and Lien is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding An Shin Food Services and Lien Chang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Chang Electronic and An Shin 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 An Shin Food Services are associated (or correlated) with Lien Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Chang Electronic has no effect on the direction of An Shin i.e., An Shin and Lien Chang go up and down completely randomly.

Pair Corralation between An Shin and Lien Chang

Assuming the 90 days trading horizon An Shin Food Services is expected to generate 0.2 times more return on investment than Lien Chang. However, An Shin Food Services is 4.92 times less risky than Lien Chang. It trades about -0.07 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about -0.06 per unit of risk. If you would invest  6,440  in An Shin Food Services on October 10, 2024 and sell it today you would lose (60.00) from holding An Shin Food Services or give up 0.93% of portfolio value over 90 days.

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

An Shin Food Services  vs.  Lien Chang Electronic

An Shin Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days An Shin Food Services 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.

Lien Chang Electronic

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lien Chang Electronic are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lien Chang showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with An Shin and Lien Chang

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

The idea behind An Shin Food Services and Lien Chang Electronic 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.