Correlation Between Taiwan Navigation and Yang Ming

Can any of the company-specific risk be diversified away by investing in both Taiwan Navigation and Yang Ming 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 Taiwan Navigation and Yang Ming into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Taiwan Navigation Co and Yang Ming Marine, you can compare the effects of market volatilities on Taiwan Navigation and Yang Ming 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 Taiwan Navigation with a short position of Yang Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Navigation and Yang Ming.

Diversification Opportunities for Taiwan Navigation and Yang Ming

0.28

Correlation Coefficient

Taiwan Navigation  Yang Ming

Modest diversification

The 3 months correlation between Taiwan and Yang is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and Yang Ming Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yang Ming Marine and Taiwan Navigation 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 Taiwan Navigation Co are associated (or correlated) with Yang Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yang Ming Marine has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and Yang Ming go up and down completely randomly.

Pair Corralation between Taiwan Navigation and Yang Ming

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to generate 0.65 times more return on investment than Yang Ming. However, Taiwan Navigation Co is 1.53 times less risky than Yang Ming. It trades about 0.09 of its potential returns per unit of risk. Yang Ming Marine is currently generating about 0.01 per unit of risk. If you would invest  2,935  in Taiwan Navigation Co on December 29, 2024 and sell it today you would earn a total of  175.00  from holding Taiwan Navigation Co or generate 5.96% return on investment over 90 days.

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

Taiwan Navigation Co  vs.  Yang Ming Marine

Taiwan Navigation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Navigation Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Navigation may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Taiwan Navigation and Yang Ming

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

The idea behind Taiwan Navigation Co and Yang Ming Marine 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.