Correlation Between Yang Ming and First Steamship

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

Diversification Opportunities for Yang Ming and First Steamship

-0.01

Correlation Coefficient

Yang Ming  First Steamship

Good diversification

The 3 months correlation between Yang and First is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and First Steamship Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Steamship 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 First Steamship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Steamship has no effect on the direction of Yang Ming i.e., Yang Ming and First Steamship go up and down completely randomly.

Pair Corralation between Yang Ming and First Steamship

Assuming the 90 days trading horizon Yang Ming Marine is expected to generate 1.28 times more return on investment than First Steamship. However, Yang Ming is 1.28 times more volatile than First Steamship Co. It trades about 0.16 of its potential returns per unit of risk. First Steamship Co is currently generating about 0.04 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  1,690  from holding Yang Ming Marine or generate 27.39% return on investment over 90 days.

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

Yang Ming Marine  vs.  First Steamship Co

Yang Ming Marine

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 12 (%) 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.

First Steamship

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Steamship Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, First Steamship 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 First Steamship

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

The idea behind Yang Ming Marine and First Steamship 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.