Correlation Between Yageo Corp and Excellence Optoelectronic

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

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

Diversification Opportunities for Yageo Corp and Excellence Optoelectronic

0.8

Correlation Coefficient

Yageo Corp  Excellence Optoelectronic

Very poor diversification

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

Pair Corralation between Yageo Corp and Excellence Optoelectronic

Assuming the 90 days trading horizon Yageo Corp is expected to generate 1.03 times more return on investment than Excellence Optoelectronic. However, Yageo Corp is 1.03 times more volatile than Excellence Optoelectronic. It trades about -0.03 of its potential returns per unit of risk. Excellence Optoelectronic is currently generating about -0.1 per unit of risk. If you would invest  53,600  in Yageo Corp on December 30, 2024 and sell it today you would lose (2,600) from holding Yageo Corp or give up 4.85% of portfolio value over 90 days.

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

Yageo Corp  vs.  Excellence Optoelectronic

Yageo Corp

Risk-Adjusted Performance

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 fairly stable basic indicators, Yageo Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Excellence Optoelectronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Excellence Optoelectronic 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 Excellence Optoelectronic

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

The idea behind Yageo Corp and Excellence Optoelectronic 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.