Correlation Between Cheng Shin and Yulon Nissan

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

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

Diversification Opportunities for Cheng Shin and Yulon Nissan

0.34

Correlation Coefficient

Cheng Shin  Yulon Nissan

Weak diversification

The 3 months correlation between Cheng and Yulon is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Yulon Nissan Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yulon Nissan Motor and Cheng Shin 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 Cheng Shin Rubber are associated (or correlated) with Yulon Nissan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yulon Nissan Motor has no effect on the direction of Cheng Shin i.e., Cheng Shin and Yulon Nissan go up and down completely randomly.

Pair Corralation between Cheng Shin and Yulon Nissan

Assuming the 90 days trading horizon Cheng Shin is expected to generate 16.73 times less return on investment than Yulon Nissan. But when comparing it to its historical volatility, Cheng Shin Rubber is 1.83 times less risky than Yulon Nissan. It trades about 0.03 of its potential returns per unit of risk. Yulon Nissan Motor is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  6,840  in Yulon Nissan Motor on December 5, 2024 and sell it today you would earn a total of  890.00  from holding Yulon Nissan Motor or generate 13.01% return on investment over 90 days.

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

Cheng Shin Rubber  vs.  Yulon Nissan Motor

Cheng Shin Rubber

Risk-Adjusted Performance

Very Weak

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

Yulon Nissan Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yulon Nissan Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Cheng Shin and Yulon Nissan

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

The idea behind Cheng Shin Rubber and Yulon Nissan Motor 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..