Correlation Between YuantaP Shares and STARLUX Airlines

Can any of the company-specific risk be diversified away by investing in both YuantaP Shares and STARLUX Airlines 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 STARLUX Airlines 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 STARLUX Airlines Co, you can compare the effects of market volatilities on YuantaP Shares and STARLUX Airlines 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 STARLUX Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of YuantaP Shares and STARLUX Airlines.

Diversification Opportunities for YuantaP Shares and STARLUX Airlines

0.65

Correlation Coefficient

YuantaP Shares  STARLUX Airlines

Poor diversification

The 3 months correlation between YuantaP and STARLUX is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares Taiwan Mid Cap and STARLUX Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STARLUX Airlines 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 STARLUX Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STARLUX Airlines has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and STARLUX Airlines go up and down completely randomly.

Pair Corralation between YuantaP Shares and STARLUX Airlines

Assuming the 90 days trading horizon YuantaP Shares is expected to generate 2.4 times less return on investment than STARLUX Airlines. But when comparing it to its historical volatility, YuantaP shares Taiwan Mid Cap is 1.17 times less risky than STARLUX Airlines. It trades about 0.04 of its potential returns per unit of risk. STARLUX Airlines Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,795  in STARLUX Airlines Co on September 15, 2024 and sell it today you would earn a total of  45.00  from holding STARLUX Airlines Co or generate 1.61% 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.  STARLUX Airlines 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.

STARLUX Airlines

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STARLUX Airlines Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, STARLUX Airlines is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with YuantaP Shares and STARLUX Airlines

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

The idea behind YuantaP shares Taiwan Mid Cap and STARLUX Airlines 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.