Correlation Between Wei Chih and Yieh United
Can any of the company-specific risk be diversified away by investing in both Wei Chih and Yieh United 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 Chih and Yieh United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wei Chih Steel and Yieh United Steel, you can compare the effects of market volatilities on Wei Chih and Yieh United 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 Chih with a short position of Yieh United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wei Chih and Yieh United.
Diversification Opportunities for Wei Chih and Yieh United
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wei and Yieh is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Wei Chih Steel and Yieh United Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yieh United Steel and Wei Chih 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 Chih Steel are associated (or correlated) with Yieh United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yieh United Steel has no effect on the direction of Wei Chih i.e., Wei Chih and Yieh United go up and down completely randomly.
Pair Corralation between Wei Chih and Yieh United
Assuming the 90 days trading horizon Wei Chih Steel is expected to under-perform the Yieh United. In addition to that, Wei Chih is 1.04 times more volatile than Yieh United Steel. It trades about -0.1 of its total potential returns per unit of risk. Yieh United Steel is currently generating about 0.01 per unit of volatility. If you would invest 638.00 in Yieh United Steel on September 3, 2024 and sell it today you would earn a total of 1.00 from holding Yieh United Steel or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wei Chih Steel vs. Yieh United Steel
Performance |
| Timeline |
| Wei Chih Steel |
| Yieh United Steel |
Wei Chih and Yieh United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wei Chih and Yieh United
The main advantage of trading using opposite Wei Chih and Yieh United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wei Chih position performs unexpectedly, Yieh United 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 Yieh United will offset losses from the drop in Yieh United's long position.The idea behind Wei Chih Steel and Yieh United 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.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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