Correlation Between Chun Yuan and Yieh United

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

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

Diversification Opportunities for Chun Yuan and Yieh United

0.66

Correlation Coefficient

Chun Yuan  Yieh United

Poor diversification

The 3 months correlation between Chun and Yieh is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Chun Yuan 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 Chun Yuan 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 Chun Yuan 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 Chun Yuan i.e., Chun Yuan and Yieh United go up and down completely randomly.

Pair Corralation between Chun Yuan and Yieh United

Assuming the 90 days trading horizon Chun Yuan is expected to generate 3.53 times less return on investment than Yieh United. But when comparing it to its historical volatility, Chun Yuan Steel is 1.77 times less risky than Yieh United. It trades about 0.04 of its potential returns per unit of risk. Yieh United Steel is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  628.00  in Yieh United Steel on December 4, 2024 and sell it today you would earn a total of  49.00  from holding Yieh United Steel or generate 7.8% return on investment over 90 days.

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

Chun Yuan Steel  vs.  Yieh United Steel

Chun Yuan Steel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chun Yuan Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chun Yuan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Yieh United Steel

Risk-Adjusted Performance

Modest

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

Pair Trading with Chun Yuan and Yieh United

The main advantage of trading using opposite Chun Yuan and Yieh United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chun Yuan 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 Chun Yuan 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.