Correlation Between Yageo Corp and Taiwan Mask

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

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

Diversification Opportunities for Yageo Corp and Taiwan Mask

0.8

Correlation Coefficient

Yageo Corp  Taiwan Mask

Very poor diversification

The 3 months correlation between Yageo and Taiwan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Yageo Corp and Taiwan Mask Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Mask Corp and Yageo Corp 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 Yageo Corp are associated (or correlated) with Taiwan Mask. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Mask Corp has no effect on the direction of Yageo Corp i.e., Yageo Corp and Taiwan Mask go up and down completely randomly.

Pair Corralation between Yageo Corp and Taiwan Mask

Assuming the 90 days trading horizon Yageo Corp is expected to under-perform the Taiwan Mask. In addition to that, Yageo Corp is 1.1 times more volatile than Taiwan Mask Corp. It trades about -0.15 of its total potential returns per unit of risk. Taiwan Mask Corp is currently generating about -0.09 per unit of volatility. If you would invest  5,710  in Taiwan Mask Corp on September 15, 2024 and sell it today you would lose (550.00) from holding Taiwan Mask Corp or give up 9.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Yageo Corp  vs.  Taiwan Mask Corp

Yageo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yageo Corp 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Taiwan Mask Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Mask Corp 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.

Pair Trading with Yageo Corp and Taiwan Mask

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

The idea behind Yageo Corp and Taiwan Mask Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.