Correlation Between Wei Chuan and Yageo Corp
Can any of the company-specific risk be diversified away by investing in both Wei Chuan and Yageo Corp 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 Wei Chuan and Yageo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wei Chuan Foods and Yageo Corp, you can compare the effects of market volatilities on Wei Chuan and Yageo Corp 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 Wei Chuan with a short position of Yageo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wei Chuan and Yageo Corp.
Diversification Opportunities for Wei Chuan and Yageo Corp
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Wei and Yageo is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Wei Chuan Foods and Yageo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yageo Corp and Wei Chuan 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 Wei Chuan Foods are associated (or correlated) with Yageo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yageo Corp has no effect on the direction of Wei Chuan i.e., Wei Chuan and Yageo Corp go up and down completely randomly.
Pair Corralation between Wei Chuan and Yageo Corp
Assuming the 90 days trading horizon Wei Chuan Foods is expected to generate 0.35 times more return on investment than Yageo Corp. However, Wei Chuan Foods is 2.88 times less risky than Yageo Corp. It trades about 0.03 of its potential returns per unit of risk. Yageo Corp is currently generating about -0.1 per unit of risk. If you would invest 1,790 in Wei Chuan Foods on September 15, 2024 and sell it today you would earn a total of 5.00 from holding Wei Chuan Foods or generate 0.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wei Chuan Foods vs. Yageo Corp
Performance |
| Timeline |
| Wei Chuan Foods |
| Yageo Corp |
Wei Chuan and Yageo Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wei Chuan and Yageo Corp
The main advantage of trading using opposite Wei Chuan and Yageo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wei Chuan position performs unexpectedly, Yageo Corp 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 Yageo Corp will offset losses from the drop in Yageo Corp's long position.| Wei Chuan vs. Uni President Enterprises Corp | Wei Chuan vs. Taisun Enterprise Co | Wei Chuan vs. AGV Products Corp | Wei Chuan vs. Great Wall Enterprise |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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