Correlation Between Yang Ming and Realtek Semiconductor

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

Diversification Opportunities for Yang Ming and Realtek Semiconductor

-0.06
  Correlation Coefficient

Good diversification

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

Pair Corralation between Yang Ming and Realtek Semiconductor

Assuming the 90 days trading horizon Yang Ming Marine is expected to generate 0.99 times more return on investment than Realtek Semiconductor. However, Yang Ming Marine is 1.01 times less risky than Realtek Semiconductor. It trades about 0.01 of its potential returns per unit of risk. Realtek Semiconductor Corp is currently generating about -0.02 per unit of risk. If you would invest  7,520  in Yang Ming Marine on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Yang Ming Marine or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Yang Ming Marine  vs.  Realtek Semiconductor Corp

 Performance 
       Timeline  
Yang Ming Marine 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.
Realtek Semiconductor 

Risk-Adjusted Performance

Very Weak

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

Yang Ming and Realtek Semiconductor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Yang Ming and Realtek Semiconductor

The main advantage of trading using opposite Yang Ming and Realtek Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yang Ming position performs unexpectedly, Realtek Semiconductor 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 Realtek Semiconductor will offset losses from the drop in Realtek Semiconductor's long position.
The idea behind Yang Ming Marine and Realtek Semiconductor 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.
Check out your portfolio center.
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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