Correlation Between Yong Shun and Compal Broadband

Can any of the company-specific risk be diversified away by investing in both Yong Shun and Compal Broadband 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 Yong Shun and Compal Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yong Shun Chemical and Compal Broadband Networks, you can compare the effects of market volatilities on Yong Shun and Compal Broadband 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 Yong Shun with a short position of Compal Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yong Shun and Compal Broadband.

Diversification Opportunities for Yong Shun and Compal Broadband

-0.48

Correlation Coefficient

Yong Shun  Compal Broadband

Very good diversification

The 3 months correlation between Yong and Compal is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Yong Shun Chemical and Compal Broadband Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Broadband Networks and Yong Shun 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 Yong Shun Chemical are associated (or correlated) with Compal Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compal Broadband Networks has no effect on the direction of Yong Shun i.e., Yong Shun and Compal Broadband go up and down completely randomly.

Pair Corralation between Yong Shun and Compal Broadband

Assuming the 90 days trading horizon Yong Shun Chemical is expected to generate 0.19 times more return on investment than Compal Broadband. However, Yong Shun Chemical is 5.38 times less risky than Compal Broadband. It trades about -0.07 of its potential returns per unit of risk. Compal Broadband Networks is currently generating about -0.1 per unit of risk. If you would invest  1,590  in Yong Shun Chemical on September 16, 2024 and sell it today you would lose (20.00) from holding Yong Shun Chemical or give up 1.26% of portfolio value over 90 days.

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

Yong Shun Chemical  vs.  Compal Broadband Networks

Yong Shun Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yong Shun Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Yong Shun is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Compal Broadband Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compal Broadband Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Compal Broadband 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 Yong Shun and Compal Broadband

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

The idea behind Yong Shun Chemical and Compal Broadband Networks 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.