Correlation Between Yang Ming and Allis Electric

Can any of the company-specific risk be diversified away by investing in both Yang Ming and Allis Electric 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 Yang Ming and Allis Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yang Ming Marine and Allis Electric Co, you can compare the effects of market volatilities on Yang Ming and Allis Electric 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 Yang Ming with a short position of Allis Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yang Ming and Allis Electric.

Diversification Opportunities for Yang Ming and Allis Electric

-0.62

Correlation Coefficient

Yang Ming  Allis Electric

Excellent diversification

The 3 months correlation between Yang and Allis is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Allis Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allis Electric and Yang Ming 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 Yang Ming Marine are associated (or correlated) with Allis Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allis Electric has no effect on the direction of Yang Ming i.e., Yang Ming and Allis Electric go up and down completely randomly.

Pair Corralation between Yang Ming and Allis Electric

Assuming the 90 days trading horizon Yang Ming is expected to generate 2.03 times less return on investment than Allis Electric. But when comparing it to its historical volatility, Yang Ming Marine is 1.31 times less risky than Allis Electric. It trades about 0.05 of its potential returns per unit of risk. Allis Electric Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,330  in Allis Electric Co on October 12, 2024 and sell it today you would earn a total of  6,510  from holding Allis Electric Co or generate 195.5% return on investment over 90 days.

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

Yang Ming Marine  vs.  Allis Electric Co

Yang Ming Marine

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yang Ming showed solid returns over the last few months and may actually be approaching a breakup point.

Allis Electric

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Yang Ming and Allis Electric

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

The idea behind Yang Ming Marine and Allis Electric Co 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.