Correlation Between Yang Ming and Answer Technology

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

Diversification Opportunities for Yang Ming and Answer Technology

0.34

Correlation Coefficient

Yang Ming  Answer Technology

Weak diversification

The 3 months correlation between Yang and Answer is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Answer Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Answer Technology 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 Answer Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Answer Technology has no effect on the direction of Yang Ming i.e., Yang Ming and Answer Technology go up and down completely randomly.

Pair Corralation between Yang Ming and Answer Technology

Assuming the 90 days trading horizon Yang Ming is expected to generate 46.04 times less return on investment than Answer Technology. But when comparing it to its historical volatility, Yang Ming Marine is 1.69 times less risky than Answer Technology. It trades about 0.01 of its potential returns per unit of risk. Answer Technology Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  5,080  in Answer Technology Co on December 29, 2024 and sell it today you would earn a total of  2,400  from holding Answer Technology Co or generate 47.24% 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.  Answer Technology Co

Yang Ming Marine

Risk-Adjusted Performance

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.

Answer Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Answer Technology Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Answer Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yang Ming and Answer Technology

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

The idea behind Yang Ming Marine and Answer Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.