Correlation Between K Way and YuantaP Shares

Can any of the company-specific risk be diversified away by investing in both K Way and YuantaP Shares 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 K Way and YuantaP Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K Way Information and YuantaP shares Taiwan Mid Cap, you can compare the effects of market volatilities on K Way and YuantaP Shares 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 K Way with a short position of YuantaP Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of K Way and YuantaP Shares.

Diversification Opportunities for K Way and YuantaP Shares

0.32

Correlation Coefficient

K Way  YuantaP Shares

Weak diversification

The 3 months correlation between 5201 and YuantaP is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding K Way Information and YuantaP shares Taiwan Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YuantaP shares Taiwan and K Way 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 K Way Information are associated (or correlated) with YuantaP Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YuantaP shares Taiwan has no effect on the direction of K Way i.e., K Way and YuantaP Shares go up and down completely randomly.

Pair Corralation between K Way and YuantaP Shares

Assuming the 90 days trading horizon K Way Information is expected to generate 2.92 times more return on investment than YuantaP Shares. However, K Way is 2.92 times more volatile than YuantaP shares Taiwan Mid Cap. It trades about 0.17 of its potential returns per unit of risk. YuantaP shares Taiwan Mid Cap is currently generating about -0.02 per unit of risk. If you would invest  2,840  in K Way Information on December 28, 2024 and sell it today you would earn a total of  695.00  from holding K Way Information or generate 24.47% return on investment over 90 days.

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

K Way Information  vs.  YuantaP shares Taiwan Mid Cap

K Way Information

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in K Way Information are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, K Way showed solid returns over the last few months and may actually be approaching a breakup point.

YuantaP shares Taiwan

Risk-Adjusted Performance

Very Weak

Over the last 90 days YuantaP shares Taiwan Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, YuantaP Shares 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 K Way and YuantaP Shares

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

The idea behind K Way Information and YuantaP shares Taiwan Mid Cap 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.