Correlation Between Yang Ming and United Integrated

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

Diversification Opportunities for Yang Ming and United Integrated

0.85

Correlation Coefficient

Yang Ming  United Integrated

Very poor diversification

The 3 months correlation between Yang and United is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and United Integrated Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Integrated 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 United Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Integrated has no effect on the direction of Yang Ming i.e., Yang Ming and United Integrated go up and down completely randomly.

Pair Corralation between Yang Ming and United Integrated

Assuming the 90 days trading horizon Yang Ming is expected to generate 3.42 times less return on investment than United Integrated. In addition to that, Yang Ming is 1.76 times more volatile than United Integrated Services. It trades about 0.06 of its total potential returns per unit of risk. United Integrated Services is currently generating about 0.35 per unit of volatility. If you would invest  40,850  in United Integrated Services on September 23, 2024 and sell it today you would earn a total of  5,250  from holding United Integrated Services or generate 12.85% return on investment over 90 days.

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

Yang Ming Marine  vs.  United Integrated Services

Yang Ming Marine

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 10 (%) 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.

United Integrated

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Integrated Services are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, United Integrated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yang Ming and United Integrated

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

The idea behind Yang Ming Marine and United Integrated Services 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .