Correlation Between Rafael Microelectronics and Lien Chang

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

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

Diversification Opportunities for Rafael Microelectronics and Lien Chang

0.3

Correlation Coefficient

Rafael Microelectronics  Lien Chang

Weak diversification

The 3 months correlation between Rafael and Lien is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Rafael Microelectronics 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 Rafael Microelectronics 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 Rafael Microelectronics 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 Rafael Microelectronics i.e., Rafael Microelectronics and Lien Chang go up and down completely randomly.

Pair Corralation between Rafael Microelectronics and Lien Chang

Assuming the 90 days trading horizon Rafael Microelectronics is expected to under-perform the Lien Chang. But the stock apears to be less risky and, when comparing its historical volatility, Rafael Microelectronics is 2.48 times less risky than Lien Chang. The stock trades about -0.06 of its potential returns per unit of risk. The Lien Chang Electronic is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,335  in Lien Chang Electronic on October 4, 2024 and sell it today you would earn a total of  190.00  from holding Lien Chang Electronic or generate 14.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Rafael Microelectronics  vs.  Lien Chang Electronic

Rafael Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rafael Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture 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 Rafael Microelectronics and Lien Chang

The main advantage of trading using opposite Rafael Microelectronics and Lien Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rafael Microelectronics 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 Rafael Microelectronics 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.