Correlation Between Lealea Enterprise and Chyang Sheng

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

By analyzing existing cross correlation between Lealea Enterprise Co and Chyang Sheng Dyeing, you can compare the effects of market volatilities on Lealea Enterprise and Chyang Sheng 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 Lealea Enterprise with a short position of Chyang Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lealea Enterprise and Chyang Sheng.

Diversification Opportunities for Lealea Enterprise and Chyang Sheng

-0.23

Correlation Coefficient

Lealea Enterprise  Chyang Sheng

Very good diversification

The 3 months correlation between Lealea and Chyang is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lealea Enterprise Co and Chyang Sheng Dyeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chyang Sheng Dyeing and Lealea Enterprise 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 Lealea Enterprise Co are associated (or correlated) with Chyang Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chyang Sheng Dyeing has no effect on the direction of Lealea Enterprise i.e., Lealea Enterprise and Chyang Sheng go up and down completely randomly.

Pair Corralation between Lealea Enterprise and Chyang Sheng

Assuming the 90 days trading horizon Lealea Enterprise Co is expected to under-perform the Chyang Sheng. But the stock apears to be less risky and, when comparing its historical volatility, Lealea Enterprise Co is 1.03 times less risky than Chyang Sheng. The stock trades about -0.12 of its potential returns per unit of risk. The Chyang Sheng Dyeing is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,355  in Chyang Sheng Dyeing on October 20, 2024 and sell it today you would earn a total of  115.00  from holding Chyang Sheng Dyeing or generate 4.88% return on investment over 90 days.

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

Lealea Enterprise Co  vs.  Chyang Sheng Dyeing

Lealea Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lealea Enterprise Co 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.

Chyang Sheng Dyeing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chyang Sheng Dyeing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chyang Sheng is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lealea Enterprise and Chyang Sheng

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

The idea behind Lealea Enterprise Co and Chyang Sheng Dyeing 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.