Correlation Between Yang Ming and CHC Healthcare

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

Diversification Opportunities for Yang Ming and CHC Healthcare

-0.23

Correlation Coefficient

Yang Ming  CHC Healthcare

Very good diversification

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

Pair Corralation between Yang Ming and CHC Healthcare

Assuming the 90 days trading horizon Yang Ming is expected to generate 23.2 times less return on investment than CHC Healthcare. But when comparing it to its historical volatility, Yang Ming Marine is 1.46 times less risky than CHC Healthcare. It trades about 0.01 of its potential returns per unit of risk. CHC Healthcare Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,190  in CHC Healthcare Group on December 29, 2024 and sell it today you would earn a total of  870.00  from holding CHC Healthcare Group or generate 20.76% 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.  CHC Healthcare Group

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.

CHC Healthcare Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHC Healthcare Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CHC Healthcare showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yang Ming and CHC Healthcare

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

The idea behind Yang Ming Marine and CHC Healthcare Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.