Correlation Between Yulon and Hsing Ta
Can any of the company-specific risk be diversified away by investing in both Yulon and Hsing Ta 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 Yulon and Hsing Ta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yulon Motor Co and Hsing Ta Cement, you can compare the effects of market volatilities on Yulon and Hsing Ta 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 Yulon with a short position of Hsing Ta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon and Hsing Ta.
Diversification Opportunities for Yulon and Hsing Ta
Poor diversification
The 3 months correlation between Yulon and Hsing is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Motor Co and Hsing Ta Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsing Ta Cement and Yulon 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 Yulon Motor Co are associated (or correlated) with Hsing Ta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsing Ta Cement has no effect on the direction of Yulon i.e., Yulon and Hsing Ta go up and down completely randomly.
Pair Corralation between Yulon and Hsing Ta
Assuming the 90 days trading horizon Yulon Motor Co is expected to under-perform the Hsing Ta. In addition to that, Yulon is 2.22 times more volatile than Hsing Ta Cement. It trades about 0.0 of its total potential returns per unit of risk. Hsing Ta Cement is currently generating about 0.03 per unit of volatility. If you would invest 1,605 in Hsing Ta Cement on August 29, 2024 and sell it today you would earn a total of 215.00 from holding Hsing Ta Cement or generate 13.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yulon Motor Co vs. Hsing Ta Cement
Performance |
| Timeline |
| Yulon Motor |
| Hsing Ta Cement |
Yulon and Hsing Ta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yulon and Hsing Ta
The main advantage of trading using opposite Yulon and Hsing Ta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yulon position performs unexpectedly, Hsing Ta 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 Hsing Ta will offset losses from the drop in Hsing Ta's long position.| Yulon vs. China Motor Corp | Yulon vs. China Steel Corp | Yulon vs. Nan Ya Plastics | Yulon vs. Chang Hwa Commercial |
| Hsing Ta vs. Universal Cement Corp | Hsing Ta vs. Chia Hsin Cement | Hsing Ta vs. AGV Products Corp | Hsing Ta vs. Grand Pacific Petrochemical |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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