Correlation Between Lien Chang and An Shin

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

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

Diversification Opportunities for Lien Chang and An Shin

0.16

Correlation Coefficient

Lien Chang  An Shin

Average diversification

The 3 months correlation between Lien and 1259 is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lien Chang Electronic and An Shin Food Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on An Shin Food and Lien Chang 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 Lien Chang Electronic are associated (or correlated) with An Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of An Shin Food has no effect on the direction of Lien Chang i.e., Lien Chang and An Shin go up and down completely randomly.

Pair Corralation between Lien Chang and An Shin

Assuming the 90 days trading horizon Lien Chang Electronic is expected to generate 2.7 times more return on investment than An Shin. However, Lien Chang is 2.7 times more volatile than An Shin Food Services. It trades about 0.09 of its potential returns per unit of risk. An Shin Food Services is currently generating about -0.02 per unit of risk. If you would invest  1,365  in Lien Chang Electronic on December 22, 2024 and sell it today you would earn a total of  130.00  from holding Lien Chang Electronic or generate 9.52% return on investment over 90 days.

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

Lien Chang Electronic  vs.  An Shin Food Services

Lien Chang Electronic

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lien Chang Electronic are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lien Chang may actually be approaching a critical reversion point that can send shares even higher in April 2025.

An Shin Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days An Shin Food Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, An Shin 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 Lien Chang and An Shin

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

The idea behind Lien Chang Electronic and An Shin Food Services 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.