Correlation Between Excelsior Medical and Lian Hwa

Can any of the company-specific risk be diversified away by investing in both Excelsior Medical and Lian Hwa 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 Excelsior Medical and Lian Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Excelsior Medical Co and Lian Hwa Foods, you can compare the effects of market volatilities on Excelsior Medical and Lian Hwa 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 Excelsior Medical with a short position of Lian Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Excelsior Medical and Lian Hwa.

Diversification Opportunities for Excelsior Medical and Lian Hwa

-0.32

Correlation Coefficient

Excelsior Medical  Lian Hwa

Very good diversification

The 3 months correlation between Excelsior and Lian is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Excelsior Medical Co and Lian Hwa Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lian Hwa Foods and Excelsior Medical 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 Excelsior Medical Co are associated (or correlated) with Lian Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lian Hwa Foods has no effect on the direction of Excelsior Medical i.e., Excelsior Medical and Lian Hwa go up and down completely randomly.

Pair Corralation between Excelsior Medical and Lian Hwa

Assuming the 90 days trading horizon Excelsior Medical is expected to generate 15.75 times less return on investment than Lian Hwa. But when comparing it to its historical volatility, Excelsior Medical Co is 5.65 times less risky than Lian Hwa. It trades about 0.12 of its potential returns per unit of risk. Lian Hwa Foods is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  11,600  in Lian Hwa Foods on September 15, 2024 and sell it today you would earn a total of  1,550  from holding Lian Hwa Foods or generate 13.36% return on investment over 90 days.

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

Excelsior Medical Co  vs.  Lian Hwa Foods

Excelsior Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Excelsior Medical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Excelsior Medical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lian Hwa Foods

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lian Hwa Foods are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lian Hwa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Excelsior Medical and Lian Hwa

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

The idea behind Excelsior Medical Co and Lian Hwa Foods 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.