Correlation Between LARGAN Precision and Cheng Fwa

Can any of the company-specific risk be diversified away by investing in both LARGAN Precision and Cheng Fwa 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 LARGAN Precision and Cheng Fwa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LARGAN Precision Co and Cheng Fwa Industrial, you can compare the effects of market volatilities on LARGAN Precision and Cheng Fwa 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 LARGAN Precision with a short position of Cheng Fwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of LARGAN Precision and Cheng Fwa.

Diversification Opportunities for LARGAN Precision and Cheng Fwa

-0.29

Correlation Coefficient

LARGAN Precision  Cheng Fwa

Very good diversification

The 3 months correlation between LARGAN and Cheng is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding LARGAN Precision Co and Cheng Fwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Fwa Industrial and LARGAN Precision 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 LARGAN Precision Co are associated (or correlated) with Cheng Fwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Fwa Industrial has no effect on the direction of LARGAN Precision i.e., LARGAN Precision and Cheng Fwa go up and down completely randomly.

Pair Corralation between LARGAN Precision and Cheng Fwa

Assuming the 90 days trading horizon LARGAN Precision Co is expected to generate 0.61 times more return on investment than Cheng Fwa. However, LARGAN Precision Co is 1.64 times less risky than Cheng Fwa. It trades about 0.19 of its potential returns per unit of risk. Cheng Fwa Industrial is currently generating about -0.05 per unit of risk. If you would invest  255,000  in LARGAN Precision Co on October 23, 2024 and sell it today you would earn a total of  21,500  from holding LARGAN Precision Co or generate 8.43% return on investment over 90 days.

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

LARGAN Precision Co  vs.  Cheng Fwa Industrial

LARGAN Precision

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LARGAN Precision Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LARGAN Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Cheng Fwa Industrial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Fwa Industrial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cheng Fwa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LARGAN Precision and Cheng Fwa

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

The idea behind LARGAN Precision Co and Cheng Fwa Industrial 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.