Correlation Between Tang Eng and Yeou Yih
Can any of the company-specific risk be diversified away by investing in both Tang Eng and Yeou Yih 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 Tang Eng and Yeou Yih into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tang Eng Iron and Yeou Yih Steel, you can compare the effects of market volatilities on Tang Eng and Yeou Yih 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 Tang Eng with a short position of Yeou Yih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tang Eng and Yeou Yih.
Diversification Opportunities for Tang Eng and Yeou Yih
Very poor diversification
The 3 months correlation between Tang and Yeou is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tang Eng Iron and Yeou Yih Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yeou Yih Steel and Tang Eng 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 Tang Eng Iron are associated (or correlated) with Yeou Yih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yeou Yih Steel has no effect on the direction of Tang Eng i.e., Tang Eng and Yeou Yih go up and down completely randomly.
Pair Corralation between Tang Eng and Yeou Yih
Assuming the 90 days trading horizon Tang Eng Iron is expected to generate 1.4 times more return on investment than Yeou Yih. However, Tang Eng is 1.4 times more volatile than Yeou Yih Steel. It trades about 0.07 of its potential returns per unit of risk. Yeou Yih Steel is currently generating about -0.16 per unit of risk. If you would invest 3,085 in Tang Eng Iron on November 3, 2024 and sell it today you would earn a total of 55.00 from holding Tang Eng Iron or generate 1.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tang Eng Iron vs. Yeou Yih Steel
Performance |
| Timeline |
| Tang Eng Iron |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Yeou Yih Steel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Tang Eng and Yeou Yih Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tang Eng and Yeou Yih
The main advantage of trading using opposite Tang Eng and Yeou Yih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tang Eng position performs unexpectedly, Yeou Yih 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 Yeou Yih will offset losses from the drop in Yeou Yih's long position.The idea behind Tang Eng Iron and Yeou Yih 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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