Correlation Between Pan International and Lien Chang

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

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

Diversification Opportunities for Pan International and Lien Chang

0.64

Correlation Coefficient

Pan International  Lien Chang

Poor diversification

The 3 months correlation between Pan and Lien is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pan International Industrial C 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 Pan International 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 Pan International Industrial 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 Pan International i.e., Pan International and Lien Chang go up and down completely randomly.

Pair Corralation between Pan International and Lien Chang

Assuming the 90 days trading horizon Pan International Industrial Corp is expected to generate 1.13 times more return on investment than Lien Chang. However, Pan International is 1.13 times more volatile than Lien Chang Electronic. It trades about 0.17 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about -0.02 per unit of risk. If you would invest  3,780  in Pan International Industrial Corp on December 5, 2024 and sell it today you would earn a total of  1,000.00  from holding Pan International Industrial Corp or generate 26.46% return on investment over 90 days.

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

Pan International Industrial C  vs.  Lien Chang Electronic

Pan International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan International Industrial Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pan International showed solid returns over the last few months and may actually be approaching a breakup point.

Lien Chang Electronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lien Chang Electronic has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Pan International and Lien Chang

The main advantage of trading using opposite Pan International and Lien Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan International 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 Pan International Industrial 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.