Correlation Between YuantaP Shares and Elite Material

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

By analyzing existing cross correlation between YuantaP shares Taiwan Mid Cap and Elite Material Co, you can compare the effects of market volatilities on YuantaP Shares and Elite Material 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 Elite Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of YuantaP Shares and Elite Material.

Diversification Opportunities for YuantaP Shares and Elite Material

-0.49

Correlation Coefficient

YuantaP Shares  Elite Material

Very good diversification

The 3 months correlation between YuantaP and Elite is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares Taiwan Mid Cap and Elite Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Material 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 Mid Cap are associated (or correlated) with Elite Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Material has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and Elite Material go up and down completely randomly.

Pair Corralation between YuantaP Shares and Elite Material

Assuming the 90 days trading horizon YuantaP Shares is expected to generate 44.37 times less return on investment than Elite Material. But when comparing it to its historical volatility, YuantaP shares Taiwan Mid Cap is 3.23 times less risky than Elite Material. It trades about 0.04 of its potential returns per unit of risk. Elite Material Co is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  44,150  in Elite Material Co on September 15, 2024 and sell it today you would earn a total of  15,750  from holding Elite Material Co or generate 35.67% return on investment over 90 days.

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

YuantaP shares Taiwan Mid Cap  vs.  Elite Material Co

YuantaP shares Taiwan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Elite Material

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Material Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elite Material showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YuantaP Shares and Elite Material

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

The idea behind YuantaP shares Taiwan Mid Cap and Elite Material Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.