Correlation Between Pou Chen and De Licacy

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

By analyzing existing cross correlation between Pou Chen Corp and De Licacy Industrial, you can compare the effects of market volatilities on Pou Chen and De Licacy 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 Pou Chen with a short position of De Licacy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pou Chen and De Licacy.

Diversification Opportunities for Pou Chen and De Licacy

0.6

Correlation Coefficient

Pou Chen  De Licacy

Poor diversification

The 3 months correlation between Pou and 1464 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pou Chen Corp and De Licacy Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Licacy Industrial and Pou Chen 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 Pou Chen Corp are associated (or correlated) with De Licacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Licacy Industrial has no effect on the direction of Pou Chen i.e., Pou Chen and De Licacy go up and down completely randomly.

Pair Corralation between Pou Chen and De Licacy

Assuming the 90 days trading horizon Pou Chen Corp is expected to under-perform the De Licacy. But the stock apears to be less risky and, when comparing its historical volatility, Pou Chen Corp is 1.31 times less risky than De Licacy. The stock trades about -0.25 of its potential returns per unit of risk. The De Licacy Industrial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,545  in De Licacy Industrial on September 22, 2024 and sell it today you would earn a total of  130.00  from holding De Licacy Industrial or generate 8.41% return on investment over 90 days.

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

Pou Chen Corp  vs.  De Licacy Industrial

Pou Chen Corp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pou Chen Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pou Chen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

De Licacy Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Licacy Industrial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, De Licacy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pou Chen and De Licacy

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

The idea behind Pou Chen Corp and De Licacy Industrial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.