Correlation Between Yi Jinn and Tung Ho

Can any of the company-specific risk be diversified away by investing in both Yi Jinn and Tung Ho 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 Yi Jinn and Tung Ho into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yi Jinn Industrial and Tung Ho Textile, you can compare the effects of market volatilities on Yi Jinn and Tung Ho 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 Yi Jinn with a short position of Tung Ho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yi Jinn and Tung Ho.

Diversification Opportunities for Yi Jinn and Tung Ho

0.3

Correlation Coefficient

Yi Jinn  Tung Ho

Weak diversification

The 3 months correlation between 1457 and Tung is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Yi Jinn Industrial and Tung Ho Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Ho Textile and Yi Jinn 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 Yi Jinn Industrial are associated (or correlated) with Tung Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Ho Textile has no effect on the direction of Yi Jinn i.e., Yi Jinn and Tung Ho go up and down completely randomly.

Pair Corralation between Yi Jinn and Tung Ho

Assuming the 90 days trading horizon Yi Jinn is expected to generate 5.68 times less return on investment than Tung Ho. But when comparing it to its historical volatility, Yi Jinn Industrial is 1.39 times less risky than Tung Ho. It trades about 0.01 of its potential returns per unit of risk. Tung Ho Textile is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,790  in Tung Ho Textile on October 10, 2024 and sell it today you would earn a total of  635.00  from holding Tung Ho Textile or generate 35.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Yi Jinn Industrial  vs.  Tung Ho Textile

Yi Jinn Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tung Ho Textile

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tung Ho Textile are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tung Ho may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Yi Jinn and Tung Ho

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

The idea behind Yi Jinn Industrial and Tung Ho Textile 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.