Correlation Between Taiwan Chinsan and Lelon Electronics

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

By analyzing existing cross correlation between Taiwan Chinsan Electronic and Lelon Electronics Corp, you can compare the effects of market volatilities on Taiwan Chinsan and Lelon Electronics 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 Taiwan Chinsan with a short position of Lelon Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Chinsan and Lelon Electronics.

Diversification Opportunities for Taiwan Chinsan and Lelon Electronics

-0.27

Correlation Coefficient

Taiwan Chinsan  Lelon Electronics

Very good diversification

The 3 months correlation between Taiwan and Lelon is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Chinsan Electronic and Lelon Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lelon Electronics Corp and Taiwan Chinsan 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 Taiwan Chinsan Electronic are associated (or correlated) with Lelon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lelon Electronics Corp has no effect on the direction of Taiwan Chinsan i.e., Taiwan Chinsan and Lelon Electronics go up and down completely randomly.

Pair Corralation between Taiwan Chinsan and Lelon Electronics

Assuming the 90 days trading horizon Taiwan Chinsan Electronic is expected to under-perform the Lelon Electronics. In addition to that, Taiwan Chinsan is 1.02 times more volatile than Lelon Electronics Corp. It trades about 0.0 of its total potential returns per unit of risk. Lelon Electronics Corp is currently generating about 0.07 per unit of volatility. If you would invest  8,170  in Lelon Electronics Corp on December 28, 2024 and sell it today you would earn a total of  810.00  from holding Lelon Electronics Corp or generate 9.91% return on investment over 90 days.

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

Taiwan Chinsan Electronic  vs.  Lelon Electronics Corp

Taiwan Chinsan Electronic

Risk-Adjusted Performance

Very Weak

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

Lelon Electronics Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lelon Electronics Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lelon Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Chinsan and Lelon Electronics

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

The idea behind Taiwan Chinsan Electronic and Lelon Electronics Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..