Correlation Between Lien Chang and Sea Sonic

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

Diversification Opportunities for Lien Chang and Sea Sonic

-0.58

Correlation Coefficient

Lien Chang  Sea Sonic

Excellent diversification

The 3 months correlation between Lien and Sea is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lien Chang Electronic and Sea Sonic Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Sonic Electronics 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 Sea Sonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Sonic Electronics has no effect on the direction of Lien Chang i.e., Lien Chang and Sea Sonic go up and down completely randomly.

Pair Corralation between Lien Chang and Sea Sonic

Assuming the 90 days trading horizon Lien Chang Electronic is expected to under-perform the Sea Sonic. In addition to that, Lien Chang is 1.19 times more volatile than Sea Sonic Electronics. It trades about -0.06 of its total potential returns per unit of risk. Sea Sonic Electronics is currently generating about 0.12 per unit of volatility. If you would invest  6,850  in Sea Sonic Electronics on October 10, 2024 and sell it today you would earn a total of  390.00  from holding Sea Sonic Electronics or generate 5.69% return on investment over 90 days.

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

Lien Chang Electronic  vs.  Sea Sonic Electronics

Lien Chang Electronic

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lien Chang Electronic are ranked lower than 4 (%) 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.

Sea Sonic Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Sonic Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sea Sonic 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 Sea Sonic

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

The idea behind Lien Chang Electronic and Sea Sonic Electronics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.