Correlation Between Yang Ming and Shin Zu

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

Diversification Opportunities for Yang Ming and Shin Zu

0.23

Correlation Coefficient

Yang Ming  Shin Zu

Modest diversification

The 3 months correlation between Yang and Shin is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Shin Zu Shing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Zu Shing 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 Shin Zu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Zu Shing has no effect on the direction of Yang Ming i.e., Yang Ming and Shin Zu go up and down completely randomly.

Pair Corralation between Yang Ming and Shin Zu

Assuming the 90 days trading horizon Yang Ming is expected to generate 2.56 times less return on investment than Shin Zu. But when comparing it to its historical volatility, Yang Ming Marine is 1.29 times less risky than Shin Zu. It trades about 0.06 of its potential returns per unit of risk. Shin Zu Shing is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  19,500  in Shin Zu Shing on September 23, 2024 and sell it today you would earn a total of  1,600  from holding Shin Zu Shing or generate 8.21% 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.  Shin Zu Shing

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.

Shin Zu Shing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Zu Shing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Shin Zu 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 Shin Zu

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

The idea behind Yang Ming Marine and Shin Zu Shing 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.