Correlation Between Lung Hwa and Ligitek Electronics

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

Diversification Opportunities for Lung Hwa and Ligitek Electronics

0.25

Correlation Coefficient

Lung Hwa  Ligitek Electronics

Modest diversification

The 3 months correlation between Lung and Ligitek is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lung Hwa Electronics and Ligitek Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligitek Electronics 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 Ligitek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligitek Electronics has no effect on the direction of Lung Hwa i.e., Lung Hwa and Ligitek Electronics go up and down completely randomly.

Pair Corralation between Lung Hwa and Ligitek Electronics

Assuming the 90 days trading horizon Lung Hwa Electronics is expected to generate 0.51 times more return on investment than Ligitek Electronics. However, Lung Hwa Electronics is 1.95 times less risky than Ligitek Electronics. It trades about 0.07 of its potential returns per unit of risk. Ligitek Electronics Co is currently generating about 0.03 per unit of risk. If you would invest  6,390  in Lung Hwa Electronics on December 30, 2024 and sell it today you would earn a total of  500.00  from holding Lung Hwa Electronics or generate 7.82% return on investment over 90 days.

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

Lung Hwa Electronics  vs.  Ligitek Electronics Co

Lung Hwa Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lung Hwa Electronics are ranked lower than 5 (%) 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 April 2025.

Ligitek Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ligitek Electronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ligitek Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lung Hwa and Ligitek Electronics

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

The idea behind Lung Hwa Electronics and Ligitek Electronics 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.