Correlation Between Lung Hwa and Oceanic Beverages

Can any of the company-specific risk be diversified away by investing in both Lung Hwa and Oceanic Beverages 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 Lung Hwa and Oceanic Beverages into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lung Hwa Electronics and Oceanic Beverages Co, you can compare the effects of market volatilities on Lung Hwa and Oceanic Beverages 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 Lung Hwa with a short position of Oceanic Beverages. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lung Hwa and Oceanic Beverages.

Diversification Opportunities for Lung Hwa and Oceanic Beverages

-0.72

Correlation Coefficient

Lung Hwa  Oceanic Beverages

Pay attention - limited upside

The 3 months correlation between Lung and Oceanic is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lung Hwa Electronics and Oceanic Beverages Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oceanic Beverages and Lung Hwa 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 Lung Hwa Electronics are associated (or correlated) with Oceanic Beverages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oceanic Beverages has no effect on the direction of Lung Hwa i.e., Lung Hwa and Oceanic Beverages go up and down completely randomly.

Pair Corralation between Lung Hwa and Oceanic Beverages

Assuming the 90 days trading horizon Lung Hwa Electronics is expected to generate about the same return on investment as Oceanic Beverages Co. But, Lung Hwa Electronics is 1.02 times less risky than Oceanic Beverages. It trades about 0.02 of its potential returns per unit of risk. Oceanic Beverages Co is currently generating about 0.02 per unit of risk. If you would invest  1,535  in Oceanic Beverages Co on December 4, 2024 and sell it today you would earn a total of  5.00  from holding Oceanic Beverages Co or generate 0.33% return on investment over 90 days.

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

Lung Hwa Electronics  vs.  Oceanic Beverages Co

Lung Hwa Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lung Hwa Electronics 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Oceanic Beverages

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oceanic Beverages Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Oceanic Beverages showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lung Hwa and Oceanic Beverages

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

The idea behind Lung Hwa Electronics and Oceanic Beverages 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.