Correlation Between Feng Hsin and Yong Shun
Can any of the company-specific risk be diversified away by investing in both Feng Hsin and Yong Shun 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 Feng Hsin and Yong Shun into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Feng Hsin Steel and Yong Shun Chemical, you can compare the effects of market volatilities on Feng Hsin and Yong Shun 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 Feng Hsin with a short position of Yong Shun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Feng Hsin and Yong Shun.
Diversification Opportunities for Feng Hsin and Yong Shun
Poor diversification
The 3 months correlation between Feng and Yong is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Feng Hsin Steel and Yong Shun Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yong Shun Chemical and Feng Hsin 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 Feng Hsin Steel are associated (or correlated) with Yong Shun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yong Shun Chemical has no effect on the direction of Feng Hsin i.e., Feng Hsin and Yong Shun go up and down completely randomly.
Pair Corralation between Feng Hsin and Yong Shun
Assuming the 90 days trading horizon Feng Hsin Steel is expected to generate 0.99 times more return on investment than Yong Shun. However, Feng Hsin Steel is 1.01 times less risky than Yong Shun. It trades about -0.31 of its potential returns per unit of risk. Yong Shun Chemical is currently generating about -0.3 per unit of risk. If you would invest 8,070 in Feng Hsin Steel on September 5, 2024 and sell it today you would lose (730.00) from holding Feng Hsin Steel or give up 9.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Feng Hsin Steel vs. Yong Shun Chemical
Performance |
| Timeline |
| Feng Hsin Steel |
| Yong Shun Chemical |
Feng Hsin and Yong Shun Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Feng Hsin and Yong Shun
The main advantage of trading using opposite Feng Hsin and Yong Shun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Feng Hsin position performs unexpectedly, Yong Shun 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 Yong Shun will offset losses from the drop in Yong Shun's long position.The idea behind Feng Hsin Steel and Yong Shun Chemical 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.| Yong Shun vs. Sunmax Biotechnology Co | Yong Shun vs. Feng Hsin Steel | Yong Shun vs. First Copper Technology | Yong Shun vs. Century Iron And |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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