Correlation Between Yem Chio and Yang Ming

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

Diversification Opportunities for Yem Chio and Yang Ming

-0.77

Correlation Coefficient

Yem Chio  Yang Ming

Pay attention - limited upside

The 3 months correlation between Yem and Yang is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Yem Chio 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 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 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 Yem Chio i.e., Yem Chio and Yang Ming go up and down completely randomly.

Pair Corralation between Yem Chio and Yang Ming

Assuming the 90 days trading horizon Yem Chio is expected to generate 2.88 times less return on investment than Yang Ming. But when comparing it to its historical volatility, Yem Chio Co is 1.69 times less risky than Yang Ming. It trades about 0.03 of its potential returns per unit of risk. Yang Ming Marine is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,624  in Yang Ming Marine on September 14, 2024 and sell it today you would earn a total of  3,236  from holding Yang Ming Marine or generate 69.98% return on investment over 90 days.

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

Yem Chio Co  vs.  Yang Ming Marine

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Yang Ming Marine

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yang Ming showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yem Chio and Yang Ming

The main advantage of trading using opposite Yem Chio and Yang Ming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yem Chio 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 Yem Chio 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.