Correlation Between Yeou Yih and Wei Chih

Can any of the company-specific risk be diversified away by investing in both Yeou Yih and Wei Chih 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 Yeou Yih and Wei Chih into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yeou Yih Steel and Wei Chih Steel, you can compare the effects of market volatilities on Yeou Yih and Wei Chih 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 Yeou Yih with a short position of Wei Chih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yeou Yih and Wei Chih.

Diversification Opportunities for Yeou Yih and Wei Chih

0.8

Correlation Coefficient

Yeou Yih  Wei Chih

Very poor diversification

The 3 months correlation between Yeou and Wei is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Yeou Yih Steel and Wei Chih Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wei Chih Steel and Yeou Yih 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 Yeou Yih Steel are associated (or correlated) with Wei Chih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wei Chih Steel has no effect on the direction of Yeou Yih i.e., Yeou Yih and Wei Chih go up and down completely randomly.

Pair Corralation between Yeou Yih and Wei Chih

Assuming the 90 days trading horizon Yeou Yih Steel is expected to generate 0.94 times more return on investment than Wei Chih. However, Yeou Yih Steel is 1.06 times less risky than Wei Chih. It trades about 0.24 of its potential returns per unit of risk. Wei Chih Steel is currently generating about 0.16 per unit of risk. If you would invest  1,415  in Yeou Yih Steel on December 4, 2024 and sell it today you would earn a total of  185.00  from holding Yeou Yih Steel or generate 13.07% return on investment over 90 days.

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

Yeou Yih Steel  vs.  Wei Chih Steel

Yeou Yih Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yeou Yih Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yeou Yih is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wei Chih Steel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wei Chih Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wei Chih may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Yeou Yih and Wei Chih

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

The idea behind Yeou Yih Steel and Wei Chih Steel 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.