Correlation Between Tong Hwa and Lian Hwa

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

By analyzing existing cross correlation between Tong Hwa Synthetic Fiber and Lian Hwa Foods, you can compare the effects of market volatilities on Tong Hwa and Lian Hwa 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 Tong Hwa with a short position of Lian Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hwa and Lian Hwa.

Diversification Opportunities for Tong Hwa and Lian Hwa

0.0

Correlation Coefficient

Tong Hwa  Lian Hwa

Pay attention - limited upside

The 3 months correlation between Tong and Lian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hwa Synthetic Fiber and Lian Hwa Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lian Hwa Foods and Tong 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 Tong Hwa Synthetic Fiber are associated (or correlated) with Lian Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lian Hwa Foods has no effect on the direction of Tong Hwa i.e., Tong Hwa and Lian Hwa go up and down completely randomly.

Pair Corralation between Tong Hwa and Lian Hwa

If you would invest  11,150  in Lian Hwa Foods on October 8, 2024 and sell it today you would earn a total of  3,350  from holding Lian Hwa Foods or generate 30.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Tong Hwa Synthetic Fiber  vs.  Lian Hwa Foods

Tong Hwa Synthetic

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Tong Hwa Synthetic Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tong Hwa is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lian Hwa Foods

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Lian Hwa Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Lian Hwa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tong Hwa and Lian Hwa

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

The idea behind Tong Hwa Synthetic Fiber and Lian Hwa Foods 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.