Correlation Between Li Peng and Tainan Spinning

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

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

Diversification Opportunities for Li Peng and Tainan Spinning

0.87

Correlation Coefficient

Li Peng  Tainan Spinning

Very poor diversification

The 3 months correlation between 1447 and Tainan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Li Peng Enterprise and Tainan Spinning Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainan Spinning and Li Peng 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 Li Peng Enterprise are associated (or correlated) with Tainan Spinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainan Spinning has no effect on the direction of Li Peng i.e., Li Peng and Tainan Spinning go up and down completely randomly.

Pair Corralation between Li Peng and Tainan Spinning

Assuming the 90 days trading horizon Li Peng is expected to generate 3.37 times less return on investment than Tainan Spinning. But when comparing it to its historical volatility, Li Peng Enterprise is 1.13 times less risky than Tainan Spinning. It trades about 0.16 of its potential returns per unit of risk. Tainan Spinning Co is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  1,365  in Tainan Spinning Co on December 2, 2024 and sell it today you would earn a total of  130.00  from holding Tainan Spinning Co or generate 9.52% return on investment over 90 days.

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

Li Peng Enterprise  vs.  Tainan Spinning Co

Li Peng Enterprise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Li Peng Enterprise 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.

Tainan Spinning

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tainan Spinning Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tainan Spinning 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 Li Peng and Tainan Spinning

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

The idea behind Li Peng Enterprise and Tainan Spinning 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 Stocks Directory module to find actively traded stocks across global markets.