Correlation Between Yulon Finance and Taiwan Hon

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

By analyzing existing cross correlation between Yulon Finance Corp and Taiwan Hon Chuan, you can compare the effects of market volatilities on Yulon Finance and Taiwan Hon 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 Yulon Finance with a short position of Taiwan Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon Finance and Taiwan Hon.

Diversification Opportunities for Yulon Finance and Taiwan Hon

0.54

Correlation Coefficient

Yulon Finance  Taiwan Hon

Very weak diversification

The 3 months correlation between Yulon and Taiwan is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Finance Corp and Taiwan Hon Chuan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hon Chuan and Yulon Finance 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 Yulon Finance Corp are associated (or correlated) with Taiwan Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hon Chuan has no effect on the direction of Yulon Finance i.e., Yulon Finance and Taiwan Hon go up and down completely randomly.

Pair Corralation between Yulon Finance and Taiwan Hon

Assuming the 90 days trading horizon Yulon Finance is expected to generate 1.53 times less return on investment than Taiwan Hon. In addition to that, Yulon Finance is 1.05 times more volatile than Taiwan Hon Chuan. It trades about 0.15 of its total potential returns per unit of risk. Taiwan Hon Chuan is currently generating about 0.24 per unit of volatility. If you would invest  15,750  in Taiwan Hon Chuan on December 4, 2024 and sell it today you would earn a total of  850.00  from holding Taiwan Hon Chuan or generate 5.4% return on investment over 90 days.

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

Yulon Finance Corp  vs.  Taiwan Hon Chuan

Yulon Finance Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yulon Finance Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yulon Finance is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taiwan Hon Chuan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Hon Chuan are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Hon showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yulon Finance and Taiwan Hon

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

The idea behind Yulon Finance Corp and Taiwan Hon Chuan 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.