Correlation Between Yang Ming and Kedge Construction

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

Diversification Opportunities for Yang Ming and Kedge Construction

0.25

Correlation Coefficient

Yang Ming  Kedge Construction

Modest diversification

The 3 months correlation between Yang and Kedge is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Kedge Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kedge Construction 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 Kedge Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kedge Construction has no effect on the direction of Yang Ming i.e., Yang Ming and Kedge Construction go up and down completely randomly.

Pair Corralation between Yang Ming and Kedge Construction

Assuming the 90 days trading horizon Yang Ming Marine is expected to generate 2.56 times more return on investment than Kedge Construction. However, Yang Ming is 2.56 times more volatile than Kedge Construction Co. It trades about 0.17 of its potential returns per unit of risk. Kedge Construction Co is currently generating about -0.1 per unit of risk. If you would invest  6,170  in Yang Ming Marine on September 14, 2024 and sell it today you would earn a total of  1,870  from holding Yang Ming Marine or generate 30.31% return on investment over 90 days.

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

Yang Ming Marine  vs.  Kedge Construction Co

Yang Ming Marine

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 13 (%) 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.

Kedge Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kedge Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Yang Ming and Kedge Construction

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

The idea behind Yang Ming Marine and Kedge Construction 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.