Correlation Between Tainan Spinning and Yonyu Plastics

Can any of the company-specific risk be diversified away by investing in both Tainan Spinning and Yonyu Plastics 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 Tainan Spinning and Yonyu Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tainan Spinning Co and Yonyu Plastics Co, you can compare the effects of market volatilities on Tainan Spinning and Yonyu Plastics 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 Tainan Spinning with a short position of Yonyu Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tainan Spinning and Yonyu Plastics.

Diversification Opportunities for Tainan Spinning and Yonyu Plastics

0.62

Correlation Coefficient

Tainan Spinning  Yonyu Plastics

Poor diversification

The 3 months correlation between Tainan and Yonyu is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co and Yonyu Plastics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yonyu Plastics and Tainan Spinning 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 Tainan Spinning Co are associated (or correlated) with Yonyu Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yonyu Plastics has no effect on the direction of Tainan Spinning i.e., Tainan Spinning and Yonyu Plastics go up and down completely randomly.

Pair Corralation between Tainan Spinning and Yonyu Plastics

Assuming the 90 days trading horizon Tainan Spinning Co is expected to generate 1.11 times more return on investment than Yonyu Plastics. However, Tainan Spinning is 1.11 times more volatile than Yonyu Plastics Co. It trades about -0.21 of its potential returns per unit of risk. Yonyu Plastics Co is currently generating about -0.29 per unit of risk. If you would invest  1,510  in Tainan Spinning Co on September 20, 2024 and sell it today you would lose (55.00) from holding Tainan Spinning Co or give up 3.64% of portfolio value over 90 days.

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

Tainan Spinning Co  vs.  Yonyu Plastics Co

Tainan Spinning

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tainan Spinning Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Yonyu Plastics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yonyu Plastics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Tainan Spinning and Yonyu Plastics

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

The idea behind Tainan Spinning Co and Yonyu Plastics 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..