Correlation Between Yulon and San Fang
Can any of the company-specific risk be diversified away by investing in both Yulon and San Fang 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 San Fang 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 San Fang Chemical, you can compare the effects of market volatilities on Yulon and San Fang 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 San Fang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon and San Fang.
Diversification Opportunities for Yulon and San Fang
Very weak diversification
The 3 months correlation between Yulon and San is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Motor Co and San Fang Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Fang Chemical 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 San Fang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Fang Chemical has no effect on the direction of Yulon i.e., Yulon and San Fang go up and down completely randomly.
Pair Corralation between Yulon and San Fang
Assuming the 90 days trading horizon Yulon Motor Co is expected to under-perform the San Fang. But the stock apears to be less risky and, when comparing its historical volatility, Yulon Motor Co is 1.3 times less risky than San Fang. The stock trades about -0.06 of its potential returns per unit of risk. The San Fang Chemical is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,420 in San Fang Chemical on September 1, 2024 and sell it today you would earn a total of 1,600 from holding San Fang Chemical or generate 66.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.62% |
| Values | Daily Returns |
Yulon Motor Co vs. San Fang Chemical
Performance |
| Timeline |
| Yulon Motor |
| San Fang Chemical |
Yulon and San Fang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yulon and San Fang
The main advantage of trading using opposite Yulon and San Fang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yulon position performs unexpectedly, San Fang 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 San Fang will offset losses from the drop in San Fang's long position.| Yulon vs. China Motor Corp | Yulon vs. China Steel Corp | Yulon vs. Nan Ya Plastics | Yulon vs. Chang Hwa Commercial |
| San Fang vs. Asia Polymer Corp | San Fang vs. Taiwan Styrene Monomer | San Fang vs. UPC Technology Corp | San Fang vs. USI Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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