Correlation Between Advanced Lithium and Walsin Lihwa
Can any of the company-specific risk be diversified away by investing in both Advanced Lithium and Walsin Lihwa 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 Advanced Lithium and Walsin Lihwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Lithium Electrochemistry and Walsin Lihwa Corp, you can compare the effects of market volatilities on Advanced Lithium and Walsin Lihwa 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 Advanced Lithium with a short position of Walsin Lihwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Lithium and Walsin Lihwa.
Diversification Opportunities for Advanced Lithium and Walsin Lihwa
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Advanced and Walsin is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Lithium Electrochemis and Walsin Lihwa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walsin Lihwa Corp and Advanced Lithium 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 Advanced Lithium Electrochemistry are associated (or correlated) with Walsin Lihwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walsin Lihwa Corp has no effect on the direction of Advanced Lithium i.e., Advanced Lithium and Walsin Lihwa go up and down completely randomly.
Pair Corralation between Advanced Lithium and Walsin Lihwa
Assuming the 90 days trading horizon Advanced Lithium Electrochemistry is expected to generate 33.22 times more return on investment than Walsin Lihwa. However, Advanced Lithium is 33.22 times more volatile than Walsin Lihwa Corp. It trades about 0.06 of its potential returns per unit of risk. Walsin Lihwa Corp is currently generating about -0.06 per unit of risk. If you would invest 8,353 in Advanced Lithium Electrochemistry on September 23, 2024 and sell it today you would lose (4,448) from holding Advanced Lithium Electrochemistry or give up 53.25% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Advanced Lithium Electrochemis vs. Walsin Lihwa Corp
Performance |
Timeline |
Advanced Lithium Ele |
Walsin Lihwa Corp |
Advanced Lithium and Walsin Lihwa Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Advanced Lithium and Walsin Lihwa
The main advantage of trading using opposite Advanced Lithium and Walsin Lihwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Lithium position performs unexpectedly, Walsin Lihwa 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 Walsin Lihwa will offset losses from the drop in Walsin Lihwa's long position.Advanced Lithium vs. Walsin Lihwa Corp | Advanced Lithium vs. Voltronic Power Technology | Advanced Lithium vs. Advanced Energy Solution | Advanced Lithium vs. Simplo Technology Co |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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