Correlation Between Yang Ming and Walsin Lihwa

Can any of the company-specific risk be diversified away by investing in both Yang Ming and Walsin Lihwa 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 Walsin Lihwa 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 Walsin Lihwa Corp, you can compare the effects of market volatilities on Yang Ming and Walsin Lihwa 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 Walsin Lihwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yang Ming and Walsin Lihwa.

Diversification Opportunities for Yang Ming and Walsin Lihwa

0.06

Correlation Coefficient

Yang Ming  Walsin Lihwa

Significant diversification

The 3 months correlation between Yang and Walsin is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Walsin Lihwa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walsin Lihwa Corp 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 Walsin Lihwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walsin Lihwa Corp has no effect on the direction of Yang Ming i.e., Yang Ming and Walsin Lihwa go up and down completely randomly.

Pair Corralation between Yang Ming and Walsin Lihwa

Assuming the 90 days trading horizon Yang Ming is expected to generate 4.12 times less return on investment than Walsin Lihwa. But when comparing it to its historical volatility, Yang Ming Marine is 1.46 times less risky than Walsin Lihwa. It trades about 0.01 of its potential returns per unit of risk. Walsin Lihwa Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,425  in Walsin Lihwa Corp on December 29, 2024 and sell it today you would earn a total of  45.00  from holding Walsin Lihwa Corp or generate 1.86% return on investment over 90 days.

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

Yang Ming Marine  vs.  Walsin Lihwa Corp

Yang Ming Marine

Risk-Adjusted Performance

Very Weak

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

Walsin Lihwa Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Walsin Lihwa Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Walsin Lihwa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Yang Ming and Walsin Lihwa

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

The idea behind Yang Ming Marine and Walsin Lihwa 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.