Correlation Between YuantaP Shares and Hwang Chang

Can any of the company-specific risk be diversified away by investing in both YuantaP Shares and Hwang 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 YuantaP Shares and Hwang Chang 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 Hwang Chang General, you can compare the effects of market volatilities on YuantaP Shares and Hwang 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 YuantaP Shares with a short position of Hwang Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of YuantaP Shares and Hwang Chang.

Diversification Opportunities for YuantaP Shares and Hwang Chang

0.61

Correlation Coefficient

YuantaP Shares  Hwang Chang

Poor diversification

The 3 months correlation between YuantaP and Hwang is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares Taiwan Mid Cap and Hwang Chang General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwang Chang General 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 Hwang Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwang Chang General has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and Hwang Chang go up and down completely randomly.

Pair Corralation between YuantaP Shares and Hwang Chang

Assuming the 90 days trading horizon YuantaP Shares is expected to generate 51.36 times less return on investment than Hwang Chang. But when comparing it to its historical volatility, YuantaP shares Taiwan Mid Cap is 4.74 times less risky than Hwang Chang. It trades about 0.01 of its potential returns per unit of risk. Hwang Chang General is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,380  in Hwang Chang General on December 23, 2024 and sell it today you would earn a total of  2,180  from holding Hwang Chang General or generate 29.54% return on investment over 90 days.

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

YuantaP shares Taiwan Mid Cap  vs.  Hwang Chang General

YuantaP shares Taiwan

Risk-Adjusted Performance

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.

Hwang Chang General

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hwang Chang General are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hwang Chang showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YuantaP Shares and Hwang Chang

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

The idea behind YuantaP shares Taiwan Mid Cap and Hwang Chang General 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.