Correlation Between Yang Ming and Yungshin Construction

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

Diversification Opportunities for Yang Ming and Yungshin Construction

0.46

Correlation Coefficient

Yang Ming  Yungshin Construction

Very weak diversification

The 3 months correlation between Yang and Yungshin is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Yungshin Construction Developm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yungshin Construction 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 Yungshin Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yungshin Construction has no effect on the direction of Yang Ming i.e., Yang Ming and Yungshin Construction go up and down completely randomly.

Pair Corralation between Yang Ming and Yungshin Construction

Assuming the 90 days trading horizon Yang Ming Marine is expected to generate 0.78 times more return on investment than Yungshin Construction. However, Yang Ming Marine is 1.28 times less risky than Yungshin Construction. It trades about 0.03 of its potential returns per unit of risk. Yungshin Construction Development is currently generating about -0.04 per unit of risk. If you would invest  7,520  in Yang Ming Marine on December 28, 2024 and sell it today you would earn a total of  140.00  from holding Yang Ming Marine or generate 1.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.21%
Values	Daily Returns

Yang Ming Marine  vs.  Yungshin Construction Developm

Yang Ming Marine

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Yungshin Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yungshin Construction Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Yungshin Construction 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 Yungshin Construction

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

The idea behind Yang Ming Marine and Yungshin Construction Development 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.