Correlation Between Lien Chang and U Ming

Can any of the company-specific risk be diversified away by investing in both Lien Chang and U Ming 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 U Ming 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 U Ming Marine Transport, you can compare the effects of market volatilities on Lien Chang and U Ming 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 U Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lien Chang and U Ming.

Diversification Opportunities for Lien Chang and U Ming

0.37

Correlation Coefficient

Lien Chang  U Ming

Weak diversification

The 3 months correlation between Lien and 2606 is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lien Chang Electronic and U Ming Marine Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Ming Marine 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 U Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Ming Marine has no effect on the direction of Lien Chang i.e., Lien Chang and U Ming go up and down completely randomly.

Pair Corralation between Lien Chang and U Ming

Assuming the 90 days trading horizon Lien Chang Electronic is expected to under-perform the U Ming. In addition to that, Lien Chang is 1.97 times more volatile than U Ming Marine Transport. It trades about -0.03 of its total potential returns per unit of risk. U Ming Marine Transport is currently generating about -0.04 per unit of volatility. If you would invest  5,910  in U Ming Marine Transport on October 4, 2024 and sell it today you would lose (100.00) from holding U Ming Marine Transport or give up 1.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Lien Chang Electronic  vs.  U Ming Marine Transport

Lien Chang Electronic

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lien Chang Electronic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lien Chang showed solid returns over the last few months and may actually be approaching a breakup point.

U Ming Marine

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, U Ming 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 U Ming

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

The idea behind Lien Chang Electronic and U Ming Marine Transport 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..