Correlation Between Luo Lih and TCI

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

By analyzing existing cross correlation between Luo Lih Fen and TCI Co, you can compare the effects of market volatilities on Luo Lih and TCI 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 Luo Lih with a short position of TCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luo Lih and TCI.

Diversification Opportunities for Luo Lih and TCI

0.5

Correlation Coefficient

Luo Lih  TCI

Very weak diversification

The 3 months correlation between Luo and TCI is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Luo Lih Fen and TCI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCI Co and Luo Lih 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 Luo Lih Fen are associated (or correlated) with TCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCI Co has no effect on the direction of Luo Lih i.e., Luo Lih and TCI go up and down completely randomly.

Pair Corralation between Luo Lih and TCI

Assuming the 90 days trading horizon Luo Lih Fen is expected to under-perform the TCI. In addition to that, Luo Lih is 1.17 times more volatile than TCI Co. It trades about -0.05 of its total potential returns per unit of risk. TCI Co is currently generating about 0.11 per unit of volatility. If you would invest  12,750  in TCI Co on December 4, 2024 and sell it today you would earn a total of  1,750  from holding TCI Co or generate 13.73% return on investment over 90 days.

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

Luo Lih Fen  vs.  TCI Co

Luo Lih Fen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Luo Lih Fen 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.

TCI Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TCI Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TCI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luo Lih and TCI

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

The idea behind Luo Lih Fen and TCI Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.