Correlation Between Trk Corp and Luo Lih

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

By analyzing existing cross correlation between Trk Corp and Luo Lih Fen, you can compare the effects of market volatilities on Trk Corp and Luo Lih 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 Trk Corp with a short position of Luo Lih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trk Corp and Luo Lih.

Diversification Opportunities for Trk Corp and Luo Lih

-0.55

Correlation Coefficient

Trk Corp  Luo Lih

Excellent diversification

The 3 months correlation between Trk and Luo is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Trk Corp and Luo Lih Fen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luo Lih Fen and Trk Corp 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 Trk Corp are associated (or correlated) with Luo Lih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luo Lih Fen has no effect on the direction of Trk Corp i.e., Trk Corp and Luo Lih go up and down completely randomly.

Pair Corralation between Trk Corp and Luo Lih

Assuming the 90 days trading horizon Trk Corp is expected to under-perform the Luo Lih. But the stock apears to be less risky and, when comparing its historical volatility, Trk Corp is 1.53 times less risky than Luo Lih. The stock trades about -0.16 of its potential returns per unit of risk. The Luo Lih Fen is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,600  in Luo Lih Fen on December 5, 2024 and sell it today you would earn a total of  440.00  from holding Luo Lih Fen or generate 9.57% return on investment over 90 days.

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

Trk Corp  vs.  Luo Lih Fen

Trk Corp

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trk Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Trk Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Luo Lih Fen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Luo Lih Fen 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 Trk Corp and Luo Lih

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

The idea behind Trk Corp and Luo Lih Fen 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.