Correlation Between Taiwan High and Yang Ming

Can any of the company-specific risk be diversified away by investing in both Taiwan High 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 High 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 High Speed and Yang Ming Marine, you can compare the effects of market volatilities on Taiwan High 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 High with a short position of Yang Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan High and Yang Ming.

Diversification Opportunities for Taiwan High and Yang Ming

-0.36

Correlation Coefficient

Taiwan High  Yang Ming

Very good diversification

The 3 months correlation between Taiwan and Yang is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan High Speed 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 High 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 High Speed 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 High i.e., Taiwan High and Yang Ming go up and down completely randomly.

Pair Corralation between Taiwan High and Yang Ming

Assuming the 90 days trading horizon Taiwan High Speed is expected to generate 0.4 times more return on investment than Yang Ming. However, Taiwan High Speed is 2.48 times less risky than Yang Ming. It trades about -0.11 of its potential returns per unit of risk. Yang Ming Marine is currently generating about -0.36 per unit of risk. If you would invest  2,775  in Taiwan High Speed on October 22, 2024 and sell it today you would lose (55.00) from holding Taiwan High Speed or give up 1.98% of portfolio value over 90 days.

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

Taiwan High Speed  vs.  Yang Ming Marine

Taiwan High Speed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan High Speed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Yang Ming Marine

Risk-Adjusted Performance

0 of 100

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 High and Yang Ming

The main advantage of trading using opposite Taiwan High and Yang Ming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan High 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 High Speed 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.