Correlation Between Lung Hwa and Chaintech Technology

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

Diversification Opportunities for Lung Hwa and Chaintech Technology

0.19

Correlation Coefficient

Lung Hwa  Chaintech Technology

Average diversification

The 3 months correlation between Lung and Chaintech is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Lung Hwa Electronics and Chaintech Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chaintech Technology Corp 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 Chaintech Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chaintech Technology Corp has no effect on the direction of Lung Hwa i.e., Lung Hwa and Chaintech Technology go up and down completely randomly.

Pair Corralation between Lung Hwa and Chaintech Technology

Assuming the 90 days trading horizon Lung Hwa Electronics is expected to under-perform the Chaintech Technology. In addition to that, Lung Hwa is 1.09 times more volatile than Chaintech Technology Corp. It trades about -0.54 of its total potential returns per unit of risk. Chaintech Technology Corp is currently generating about -0.4 per unit of volatility. If you would invest  4,145  in Chaintech Technology Corp on September 16, 2024 and sell it today you would lose (580.00) from holding Chaintech Technology Corp or give up 13.99% of portfolio value over 90 days.

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

Lung Hwa Electronics  vs.  Chaintech Technology Corp

Lung Hwa Electronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lung Hwa Electronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lung Hwa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chaintech Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chaintech Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Lung Hwa and Chaintech Technology

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

The idea behind Lung Hwa Electronics and Chaintech Technology 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 Transaction History module to view history of all your transactions and understand their impact on performance.