Correlation Between Tung Ho and Yieh United

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

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

Diversification Opportunities for Tung Ho and Yieh United

0.73

Correlation Coefficient

Tung Ho  Yieh United

Poor diversification

The 3 months correlation between Tung and Yieh is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Tung Ho Steel and Yieh United Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yieh United Steel and Tung Ho 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 Tung Ho Steel are associated (or correlated) with Yieh United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yieh United Steel has no effect on the direction of Tung Ho i.e., Tung Ho and Yieh United go up and down completely randomly.

Pair Corralation between Tung Ho and Yieh United

Assuming the 90 days trading horizon Tung Ho Steel is expected to generate 0.75 times more return on investment than Yieh United. However, Tung Ho Steel is 1.34 times less risky than Yieh United. It trades about 0.01 of its potential returns per unit of risk. Yieh United Steel is currently generating about -0.02 per unit of risk. If you would invest  6,860  in Tung Ho Steel on September 14, 2024 and sell it today you would earn a total of  150.00  from holding Tung Ho Steel or generate 2.19% return on investment over 90 days.

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

Tung Ho Steel  vs.  Yieh United Steel

Tung Ho Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tung Ho Steel 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.

Yieh United Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yieh United Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Yieh United 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 Tung Ho and Yieh United

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

The idea behind Tung Ho Steel and Yieh United Steel 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.