Correlation Between Yuan Jen and Yang Ming

Can any of the company-specific risk be diversified away by investing in both Yuan Jen and Yang Ming 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 Yuan Jen and Yang Ming into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yuan Jen Enterprises and Yang Ming Marine, you can compare the effects of market volatilities on Yuan Jen and Yang Ming 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 Yuan Jen with a short position of Yang Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuan Jen and Yang Ming.

Diversification Opportunities for Yuan Jen and Yang Ming

0.59

Correlation Coefficient

Yuan Jen  Yang Ming

Very weak diversification

The 3 months correlation between Yuan and Yang is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Yuan Jen Enterprises and Yang Ming Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yang Ming Marine and Yuan Jen 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 Yuan Jen Enterprises are associated (or correlated) with Yang Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yang Ming Marine has no effect on the direction of Yuan Jen i.e., Yuan Jen and Yang Ming go up and down completely randomly.

Pair Corralation between Yuan Jen and Yang Ming

Assuming the 90 days trading horizon Yuan Jen is expected to generate 2.78 times less return on investment than Yang Ming. In addition to that, Yuan Jen is 1.74 times more volatile than Yang Ming Marine. It trades about 0.0 of its total potential returns per unit of risk. Yang Ming Marine is currently generating about 0.02 per unit of volatility. If you would invest  7,670  in Yang Ming Marine on December 26, 2024 and sell it today you would earn a total of  70.00  from holding Yang Ming Marine or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.21%
Values	Daily Returns

Yuan Jen Enterprises  vs.  Yang Ming Marine

Yuan Jen Enterprises

Risk-Adjusted Performance

Very Weak

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

Yang Ming Marine

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yang Ming 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 Yuan Jen and Yang Ming

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

The idea behind Yuan Jen Enterprises and Yang Ming Marine 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.