Correlation Between Yang Ming and Hung Ching

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

Diversification Opportunities for Yang Ming and Hung Ching

0.77

Correlation Coefficient

Yang Ming  Hung Ching

Poor diversification

The 3 months correlation between Yang and Hung is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Hung Ching Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hung Ching Development 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 Hung Ching. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hung Ching Development has no effect on the direction of Yang Ming i.e., Yang Ming and Hung Ching go up and down completely randomly.

Pair Corralation between Yang Ming and Hung Ching

Assuming the 90 days trading horizon Yang Ming Marine is expected to generate 0.84 times more return on investment than Hung Ching. However, Yang Ming Marine is 1.19 times less risky than Hung Ching. It trades about 0.05 of its potential returns per unit of risk. Hung Ching Development is currently generating about -0.06 per unit of risk. If you would invest  6,000  in Yang Ming Marine on October 25, 2024 and sell it today you would earn a total of  780.00  from holding Yang Ming Marine or generate 13.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Yang Ming Marine  vs.  Hung Ching Development

Yang Ming Marine

Risk-Adjusted Performance

0 of 100

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.

Hung Ching Development

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hung Ching Development are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hung Ching may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Yang Ming and Hung Ching

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

The idea behind Yang Ming Marine and Hung Ching Development 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.