Correlation Between Taiwan Glass and Yulon

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

By analyzing existing cross correlation between Taiwan Glass Ind and Yulon Motor Co, you can compare the effects of market volatilities on Taiwan Glass and Yulon 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 Taiwan Glass with a short position of Yulon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Glass and Yulon.

Diversification Opportunities for Taiwan Glass and Yulon

0.6

Correlation Coefficient

Taiwan Glass  Yulon

Poor diversification

The 3 months correlation between Taiwan and Yulon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Glass Ind and Yulon Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yulon Motor and Taiwan Glass 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 Taiwan Glass Ind are associated (or correlated) with Yulon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yulon Motor has no effect on the direction of Taiwan Glass i.e., Taiwan Glass and Yulon go up and down completely randomly.

Pair Corralation between Taiwan Glass and Yulon

Assuming the 90 days trading horizon Taiwan Glass Ind is expected to generate 1.41 times more return on investment than Yulon. However, Taiwan Glass is 1.41 times more volatile than Yulon Motor Co. It trades about 0.13 of its potential returns per unit of risk. Yulon Motor Co is currently generating about 0.03 per unit of risk. If you would invest  1,635  in Taiwan Glass Ind on September 2, 2024 and sell it today you would earn a total of  385.00  from holding Taiwan Glass Ind or generate 23.55% return on investment over 90 days.

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

Taiwan Glass Ind  vs.  Yulon Motor Co

Taiwan Glass Ind

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Glass Ind are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Glass showed solid returns over the last few months and may actually be approaching a breakup point.

Yulon Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yulon Motor Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yulon 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 Taiwan Glass and Yulon

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

The idea behind Taiwan Glass Ind and Yulon Motor 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .