Correlation Between Yageo Corp and Lien Chang

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

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

Diversification Opportunities for Yageo Corp and Lien Chang

-0.59

Correlation Coefficient

Yageo Corp  Lien Chang

Excellent diversification

The 3 months correlation between Yageo and Lien is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Yageo Corp and Lien Chang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Chang Electronic and Yageo 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 Yageo Corp are associated (or correlated) with Lien Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Chang Electronic has no effect on the direction of Yageo Corp i.e., Yageo Corp and Lien Chang go up and down completely randomly.

Pair Corralation between Yageo Corp and Lien Chang

Assuming the 90 days trading horizon Yageo Corp is expected to under-perform the Lien Chang. But the stock apears to be less risky and, when comparing its historical volatility, Yageo Corp is 2.36 times less risky than Lien Chang. The stock trades about -0.15 of its potential returns per unit of risk. The Lien Chang Electronic is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Lien Chang Electronic on September 15, 2024 and sell it today you would lose (20.00) from holding Lien Chang Electronic or give up 1.43% of portfolio value over 90 days.

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

Yageo Corp  vs.  Lien Chang Electronic

Yageo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yageo Corp 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Lien Chang Electronic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lien Chang Electronic are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lien Chang 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 Yageo Corp and Lien Chang

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

The idea behind Yageo Corp and Lien Chang Electronic 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .