Correlation Between Yungshin Construction and Taiwan Union

Can any of the company-specific risk be diversified away by investing in both Yungshin Construction and Taiwan Union 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 Yungshin Construction and Taiwan Union into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yungshin Construction Development and Taiwan Union Technology, you can compare the effects of market volatilities on Yungshin Construction and Taiwan Union 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 Yungshin Construction with a short position of Taiwan Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yungshin Construction and Taiwan Union.

Diversification Opportunities for Yungshin Construction and Taiwan Union

-0.53

Correlation Coefficient

Yungshin Construction  Taiwan Union

Excellent diversification

The 3 months correlation between Yungshin and Taiwan is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Yungshin Construction Developm and Taiwan Union Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Union Technology and Yungshin Construction 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 Yungshin Construction Development are associated (or correlated) with Taiwan Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Union Technology has no effect on the direction of Yungshin Construction i.e., Yungshin Construction and Taiwan Union go up and down completely randomly.

Pair Corralation between Yungshin Construction and Taiwan Union

Assuming the 90 days trading horizon Yungshin Construction is expected to generate 1.09 times less return on investment than Taiwan Union. But when comparing it to its historical volatility, Yungshin Construction Development is 1.27 times less risky than Taiwan Union. It trades about 0.1 of its potential returns per unit of risk. Taiwan Union Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,040  in Taiwan Union Technology on October 23, 2024 and sell it today you would earn a total of  10,960  from holding Taiwan Union Technology or generate 181.46% return on investment over 90 days.

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

Yungshin Construction Developm  vs.  Taiwan Union Technology

Yungshin Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yungshin Construction Development 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.

Taiwan Union Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Union Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Union 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 Yungshin Construction and Taiwan Union

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

The idea behind Yungshin Construction Development and Taiwan Union Technology 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 Commodity Directory module to find actively traded commodities issued by global exchanges.