Correlation Between YuantaP Shares and Chenming Mold

Can any of the company-specific risk be diversified away by investing in both YuantaP Shares and Chenming Mold 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 YuantaP Shares and Chenming Mold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between YuantaP shares Taiwan Top and Chenming Mold Industrial, you can compare the effects of market volatilities on YuantaP Shares and Chenming Mold 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 YuantaP Shares with a short position of Chenming Mold. Check out your portfolio center. Please also check ongoing floating volatility patterns of YuantaP Shares and Chenming Mold.

Diversification Opportunities for YuantaP Shares and Chenming Mold

0.87

Correlation Coefficient

YuantaP Shares  Chenming Mold

Very poor diversification

The 3 months correlation between YuantaP and Chenming is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares Taiwan Top and Chenming Mold Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chenming Mold Industrial and YuantaP Shares 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 YuantaP shares Taiwan Top are associated (or correlated) with Chenming Mold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chenming Mold Industrial has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and Chenming Mold go up and down completely randomly.

Pair Corralation between YuantaP Shares and Chenming Mold

Assuming the 90 days trading horizon YuantaP Shares is expected to generate 3.79 times less return on investment than Chenming Mold. But when comparing it to its historical volatility, YuantaP shares Taiwan Top is 3.18 times less risky than Chenming Mold. It trades about 0.12 of its potential returns per unit of risk. Chenming Mold Industrial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  10,900  in Chenming Mold Industrial on September 13, 2024 and sell it today you would earn a total of  3,600  from holding Chenming Mold Industrial or generate 33.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.16%
Values	Daily Returns

YuantaP shares Taiwan Top  vs.  Chenming Mold Industrial

YuantaP shares Taiwan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YuantaP shares Taiwan Top are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, YuantaP Shares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chenming Mold Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chenming Mold Industrial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chenming Mold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YuantaP Shares and Chenming Mold

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

The idea behind YuantaP shares Taiwan Top and Chenming Mold 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.