Correlation Between Tong Tai and Yang Ming

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

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

Diversification Opportunities for Tong Tai and Yang Ming

-0.27

Correlation Coefficient

Tong Tai  Yang Ming

Very good diversification

The 3 months correlation between Tong and Yang is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Tong Tai Machine Tool 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 Tong Tai 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 Tong Tai Machine Tool 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 Tong Tai i.e., Tong Tai and Yang Ming go up and down completely randomly.

Pair Corralation between Tong Tai and Yang Ming

Assuming the 90 days trading horizon Tong Tai Machine Tool is expected to generate 1.42 times more return on investment than Yang Ming. However, Tong Tai is 1.42 times more volatile than Yang Ming Marine. It trades about -0.12 of its potential returns per unit of risk. Yang Ming Marine is currently generating about -0.27 per unit of risk. If you would invest  3,110  in Tong Tai Machine Tool on October 20, 2024 and sell it today you would lose (260.00) from holding Tong Tai Machine Tool or give up 8.36% of portfolio value over 90 days.

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

Tong Tai Machine Tool  vs.  Yang Ming Marine

Tong Tai Machine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tong Tai Machine Tool 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 February 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

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Tong Tai and Yang Ming

The main advantage of trading using opposite Tong Tai and Yang Ming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Tai 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 Tong Tai Machine Tool 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.