Correlation Between Yang Ming and Tong Hsing

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

Diversification Opportunities for Yang Ming and Tong Hsing

0.0

Correlation Coefficient

Yang Ming  Tong Hsing

Pay attention - limited upside

The 3 months correlation between Yang and Tong is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Tong Hsing Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tong Hsing Electronic 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 Tong Hsing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tong Hsing Electronic has no effect on the direction of Yang Ming i.e., Yang Ming and Tong Hsing go up and down completely randomly.

Pair Corralation between Yang Ming and Tong Hsing

Assuming the 90 days trading horizon Yang Ming Marine is expected to generate 0.93 times more return on investment than Tong Hsing. However, Yang Ming Marine is 1.08 times less risky than Tong Hsing. It trades about 0.01 of its potential returns per unit of risk. Tong Hsing Electronic is currently generating about -0.13 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  0.00  from holding Yang Ming Marine or generate 0.0% return on investment over 90 days.

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

Yang Ming Marine  vs.  Tong Hsing Electronic

Yang Ming Marine

Risk-Adjusted Performance

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.

Tong Hsing Electronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tong Hsing Electronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Yang Ming and Tong Hsing

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

The idea behind Yang Ming Marine and Tong Hsing Electronic 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.