Correlation Between Lee Chi and Anderson Industrial

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

By analyzing existing cross correlation between Lee Chi Enterprises and Anderson Industrial Corp, you can compare the effects of market volatilities on Lee Chi and Anderson Industrial 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 Lee Chi with a short position of Anderson Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lee Chi and Anderson Industrial.

Diversification Opportunities for Lee Chi and Anderson Industrial

0.87

Correlation Coefficient

Lee Chi  Anderson Industrial

Very poor diversification

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

Pair Corralation between Lee Chi and Anderson Industrial

Assuming the 90 days trading horizon Lee Chi is expected to generate 8.7 times less return on investment than Anderson Industrial. But when comparing it to its historical volatility, Lee Chi Enterprises is 2.58 times less risky than Anderson Industrial. It trades about 0.02 of its potential returns per unit of risk. Anderson Industrial Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,485  in Anderson Industrial Corp on December 27, 2024 and sell it today you would earn a total of  155.00  from holding Anderson Industrial Corp or generate 10.44% return on investment over 90 days.

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

Lee Chi Enterprises  vs.  Anderson Industrial Corp

Lee Chi Enterprises

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lee Chi Enterprises are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lee Chi is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Anderson Industrial Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anderson Industrial Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Anderson Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lee Chi and Anderson Industrial

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

The idea behind Lee Chi Enterprises and Anderson Industrial Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.