Correlation Between Yang Ming and OBI Pharma

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

Diversification Opportunities for Yang Ming and OBI Pharma

0.11

Correlation Coefficient

Yang Ming  OBI Pharma

Average diversification

The 3 months correlation between Yang and OBI is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and OBI Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBI Pharma 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 OBI Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBI Pharma has no effect on the direction of Yang Ming i.e., Yang Ming and OBI Pharma go up and down completely randomly.

Pair Corralation between Yang Ming and OBI Pharma

Assuming the 90 days trading horizon Yang Ming Marine is expected to under-perform the OBI Pharma. In addition to that, Yang Ming is 1.05 times more volatile than OBI Pharma. It trades about -0.02 of its total potential returns per unit of risk. OBI Pharma is currently generating about 0.11 per unit of volatility. If you would invest  5,710  in OBI Pharma on December 23, 2024 and sell it today you would earn a total of  570.00  from holding OBI Pharma or generate 9.98% return on investment over 90 days.

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

Yang Ming Marine  vs.  OBI Pharma

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.

OBI Pharma

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OBI Pharma are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, OBI Pharma may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Yang Ming and OBI Pharma

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

The idea behind Yang Ming Marine and OBI Pharma 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.