Correlation Between Taiwan Chinsan and YCC Parts

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

By analyzing existing cross correlation between Taiwan Chinsan Electronic and YCC Parts MFG, you can compare the effects of market volatilities on Taiwan Chinsan and YCC Parts 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 Taiwan Chinsan with a short position of YCC Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Chinsan and YCC Parts.

Diversification Opportunities for Taiwan Chinsan and YCC Parts

0.04

Correlation Coefficient

Taiwan Chinsan  YCC Parts

Significant diversification

The 3 months correlation between Taiwan and YCC is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Chinsan Electronic and YCC Parts MFG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YCC Parts MFG and Taiwan Chinsan 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 Taiwan Chinsan Electronic are associated (or correlated) with YCC Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YCC Parts MFG has no effect on the direction of Taiwan Chinsan i.e., Taiwan Chinsan and YCC Parts go up and down completely randomly.

Pair Corralation between Taiwan Chinsan and YCC Parts

Assuming the 90 days trading horizon Taiwan Chinsan Electronic is expected to under-perform the YCC Parts. In addition to that, Taiwan Chinsan is 3.5 times more volatile than YCC Parts MFG. It trades about -0.02 of its total potential returns per unit of risk. YCC Parts MFG is currently generating about 0.06 per unit of volatility. If you would invest  5,490  in YCC Parts MFG on December 29, 2024 and sell it today you would earn a total of  160.00  from holding YCC Parts MFG or generate 2.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.25%
Values	Daily Returns

Taiwan Chinsan Electronic  vs.  YCC Parts MFG

Taiwan Chinsan Electronic

Risk-Adjusted Performance

Very Weak

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

YCC Parts MFG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YCC Parts MFG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, YCC Parts 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 Taiwan Chinsan and YCC Parts

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

The idea behind Taiwan Chinsan Electronic and YCC Parts MFG 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.