Correlation Between Lien Chang and CoAsia Microelectronics

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

Diversification Opportunities for Lien Chang and CoAsia Microelectronics

-0.3

Correlation Coefficient

Lien Chang  CoAsia Microelectronics

Very good diversification

The 3 months correlation between Lien and CoAsia is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Lien Chang Electronic and CoAsia Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoAsia Microelectronics 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 CoAsia Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoAsia Microelectronics has no effect on the direction of Lien Chang i.e., Lien Chang and CoAsia Microelectronics go up and down completely randomly.

Pair Corralation between Lien Chang and CoAsia Microelectronics

Assuming the 90 days trading horizon Lien Chang is expected to generate 2.59 times less return on investment than CoAsia Microelectronics. But when comparing it to its historical volatility, Lien Chang Electronic is 1.34 times less risky than CoAsia Microelectronics. It trades about 0.05 of its potential returns per unit of risk. CoAsia Microelectronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,158  in CoAsia Microelectronics on October 9, 2024 and sell it today you would earn a total of  2,572  from holding CoAsia Microelectronics or generate 222.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Lien Chang Electronic  vs.  CoAsia Microelectronics

Lien Chang Electronic

Risk-Adjusted Performance

5 of 100

Modest

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.

CoAsia Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CoAsia Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lien Chang and CoAsia Microelectronics

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

The idea behind Lien Chang Electronic and CoAsia Microelectronics 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.