Correlation Between All Ring and Lian Hwa

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

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

Diversification Opportunities for All Ring and Lian Hwa

0.43

Correlation Coefficient

All Ring  Lian Hwa

Very weak diversification

The 3 months correlation between All and Lian is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding All Ring Tech 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 All Ring 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 All Ring Tech 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 All Ring i.e., All Ring and Lian Hwa go up and down completely randomly.

Pair Corralation between All Ring and Lian Hwa

Assuming the 90 days trading horizon All Ring Tech is expected to under-perform the Lian Hwa. In addition to that, All Ring is 1.17 times more volatile than Lian Hwa Foods. It trades about -0.14 of its total potential returns per unit of risk. Lian Hwa Foods is currently generating about -0.02 per unit of volatility. If you would invest  13,800  in Lian Hwa Foods on December 29, 2024 and sell it today you would lose (700.00) from holding Lian Hwa Foods or give up 5.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.25%
Values	Daily Returns

All Ring Tech  vs.  Lian Hwa Foods

All Ring Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days All Ring Tech 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Lian Hwa Foods

Risk-Adjusted Performance

Very Weak

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

Pair Trading with All Ring and Lian Hwa

The main advantage of trading using opposite All Ring and Lian Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All Ring 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 All Ring Tech 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.