Correlation Between Lam Soon and Univanich Palm

Can any of the company-specific risk be diversified away by investing in both Lam Soon and Univanich Palm 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 Univanich Palm 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 Univanich Palm Oil, you can compare the effects of market volatilities on Lam Soon and Univanich Palm 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 Univanich Palm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Soon and Univanich Palm.

Diversification Opportunities for Lam Soon and Univanich Palm

0.85

Correlation Coefficient

Lam Soon  Univanich Palm

Very poor diversification

The 3 months correlation between Lam and Univanich is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lam Soon Public and Univanich Palm Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univanich Palm Oil 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 Univanich Palm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univanich Palm Oil has no effect on the direction of Lam Soon i.e., Lam Soon and Univanich Palm go up and down completely randomly.

Pair Corralation between Lam Soon and Univanich Palm

Assuming the 90 days trading horizon Lam Soon is expected to generate 2.41 times less return on investment than Univanich Palm. But when comparing it to its historical volatility, Lam Soon Public is 1.23 times less risky than Univanich Palm. It trades about 0.06 of its potential returns per unit of risk. Univanich Palm Oil is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  870.00  in Univanich Palm Oil on September 12, 2024 and sell it today you would earn a total of  55.00  from holding Univanich Palm Oil or generate 6.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Lam Soon Public  vs.  Univanich Palm Oil

Lam Soon Public

Risk-Adjusted Performance

4 of 100

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.

Univanich Palm Oil

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Univanich Palm Oil are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Univanich Palm may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lam Soon and Univanich Palm

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

The idea behind Lam Soon Public and Univanich Palm Oil 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.