Correlation Between Yem Chio and Hsing Ta

Can any of the company-specific risk be diversified away by investing in both Yem Chio and Hsing Ta 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 Yem Chio and Hsing Ta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yem Chio Co and Hsing Ta Cement, you can compare the effects of market volatilities on Yem Chio and Hsing Ta 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 Yem Chio with a short position of Hsing Ta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yem Chio and Hsing Ta.

Diversification Opportunities for Yem Chio and Hsing Ta

0.73

Correlation Coefficient

Yem Chio  Hsing Ta

Poor diversification

The 3 months correlation between Yem and Hsing is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Yem Chio Co and Hsing Ta Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsing Ta Cement and Yem Chio 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 Yem Chio Co are associated (or correlated) with Hsing Ta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsing Ta Cement has no effect on the direction of Yem Chio i.e., Yem Chio and Hsing Ta go up and down completely randomly.

Pair Corralation between Yem Chio and Hsing Ta

Assuming the 90 days trading horizon Yem Chio Co is expected to under-perform the Hsing Ta. In addition to that, Yem Chio is 1.58 times more volatile than Hsing Ta Cement. It trades about -0.37 of its total potential returns per unit of risk. Hsing Ta Cement is currently generating about -0.18 per unit of volatility. If you would invest  1,830  in Hsing Ta Cement on September 22, 2024 and sell it today you would lose (40.00) from holding Hsing Ta Cement or give up 2.19% of portfolio value over 90 days.

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

Yem Chio Co  vs.  Hsing Ta Cement

Yem Chio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yem Chio Co 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.

Hsing Ta Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hsing Ta Cement has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hsing Ta 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 Yem Chio and Hsing Ta

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

The idea behind Yem Chio Co and Hsing Ta Cement 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.