Correlation Between Lam Soon and Lee Feed

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

By analyzing existing cross correlation between Lam Soon Public and Lee Feed Mill, you can compare the effects of market volatilities on Lam Soon and Lee Feed 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 Lam Soon with a short position of Lee Feed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Soon and Lee Feed.

Diversification Opportunities for Lam Soon and Lee Feed

0.24

Correlation Coefficient

Lam Soon  Lee Feed

Modest diversification

The 3 months correlation between Lam and Lee is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lam Soon Public and Lee Feed Mill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lee Feed Mill and Lam Soon 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 Lam Soon Public are associated (or correlated) with Lee Feed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lee Feed Mill has no effect on the direction of Lam Soon i.e., Lam Soon and Lee Feed go up and down completely randomly.

Pair Corralation between Lam Soon and Lee Feed

Assuming the 90 days trading horizon Lam Soon is expected to generate 1.56 times less return on investment than Lee Feed. But when comparing it to its historical volatility, Lam Soon Public is 1.78 times less risky than Lee Feed. It trades about 0.06 of its potential returns per unit of risk. Lee Feed Mill is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  236.00  in Lee Feed Mill on December 25, 2024 and sell it today you would earn a total of  6.00  from holding Lee Feed Mill or generate 2.54% return on investment over 90 days.

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

Lam Soon Public  vs.  Lee Feed Mill

Lam Soon Public

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lam Soon Public are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Lam Soon is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Lee Feed Mill

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lee Feed Mill are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Lee Feed is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lam Soon and Lee Feed

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

The idea behind Lam Soon Public and Lee Feed Mill 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.