Correlation Between Lee Chi and Mosa Industrial

Can any of the company-specific risk be diversified away by investing in both Lee Chi and Mosa 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 Mosa 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 Mosa Industrial Corp, you can compare the effects of market volatilities on Lee Chi and Mosa 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 Mosa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lee Chi and Mosa Industrial.

Diversification Opportunities for Lee Chi and Mosa Industrial

0.73

Correlation Coefficient

Lee Chi  Mosa Industrial

Poor diversification

The 3 months correlation between Lee and Mosa is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lee Chi Enterprises and Mosa Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mosa 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 Mosa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mosa Industrial Corp has no effect on the direction of Lee Chi i.e., Lee Chi and Mosa Industrial go up and down completely randomly.

Pair Corralation between Lee Chi and Mosa Industrial

Assuming the 90 days trading horizon Lee Chi Enterprises is expected to under-perform the Mosa Industrial. In addition to that, Lee Chi is 1.16 times more volatile than Mosa Industrial Corp. It trades about -0.14 of its total potential returns per unit of risk. Mosa Industrial Corp is currently generating about -0.06 per unit of volatility. If you would invest  2,285  in Mosa Industrial Corp on October 26, 2024 and sell it today you would lose (120.00) from holding Mosa Industrial Corp or give up 5.25% of portfolio value over 90 days.

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

Lee Chi Enterprises  vs.  Mosa Industrial Corp

Lee Chi Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lee Chi Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Mosa Industrial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mosa Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mosa Industrial 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 Lee Chi and Mosa Industrial

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

The idea behind Lee Chi Enterprises and Mosa 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.