Correlation Between Iron Force and Lien Chang

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

By analyzing existing cross correlation between Iron Force Industrial and Lien Chang Electronic, you can compare the effects of market volatilities on Iron Force and Lien Chang 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 Iron Force with a short position of Lien Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Force and Lien Chang.

Diversification Opportunities for Iron Force and Lien Chang

-0.47

Correlation Coefficient

Iron Force  Lien Chang

Very good diversification

The 3 months correlation between Iron and Lien is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Iron Force Industrial and Lien Chang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Chang Electronic and Iron Force 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 Iron Force Industrial are associated (or correlated) with Lien Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Chang Electronic has no effect on the direction of Iron Force i.e., Iron Force and Lien Chang go up and down completely randomly.

Pair Corralation between Iron Force and Lien Chang

Assuming the 90 days trading horizon Iron Force Industrial is expected to generate 0.9 times more return on investment than Lien Chang. However, Iron Force Industrial is 1.12 times less risky than Lien Chang. It trades about 0.26 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about 0.01 per unit of risk. If you would invest  8,760  in Iron Force Industrial on February 8, 2024 and sell it today you would earn a total of  2,990  from holding Iron Force Industrial or generate 34.13% return on investment over 90 days.

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

Iron Force Industrial  vs.  Lien Chang Electronic

Iron Force Industrial

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Iron Force Industrial are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Iron Force showed solid returns over the last few months and may actually be approaching a breakup point.

Lien Chang Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Iron Force and Lien Chang

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

The idea behind Iron Force Industrial and Lien Chang Electronic 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.