Correlation Between U Ming and Lien Chang

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

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

Diversification Opportunities for U Ming and Lien Chang

0.36

Correlation Coefficient

U Ming  Lien Chang

Weak diversification

The 3 months correlation between 2606 and Lien is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Lien Chang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Chang Electronic and U Ming 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 U Ming Marine Transport are associated (or correlated) with Lien Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Chang Electronic has no effect on the direction of U Ming i.e., U Ming and Lien Chang go up and down completely randomly.

Pair Corralation between U Ming and Lien Chang

Assuming the 90 days trading horizon U Ming Marine Transport is expected to generate 0.51 times more return on investment than Lien Chang. However, U Ming Marine Transport is 1.97 times less risky than Lien Chang. It trades about -0.04 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about -0.03 per unit of risk. 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

U Ming Marine Transport  vs.  Lien Chang Electronic

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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with U Ming and Lien Chang

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

The idea behind U Ming Marine Transport and Lien Chang Electronic 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.