Correlation Between Yulon and Cathay Chemical
Can any of the company-specific risk be diversified away by investing in both Yulon and Cathay Chemical 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 Cathay Chemical 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 Cathay Chemical Works, you can compare the effects of market volatilities on Yulon and Cathay Chemical 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 Cathay Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon and Cathay Chemical.
Diversification Opportunities for Yulon and Cathay Chemical
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Yulon and Cathay is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Motor Co and Cathay Chemical Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Chemical Works 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 Cathay Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Chemical Works has no effect on the direction of Yulon i.e., Yulon and Cathay Chemical go up and down completely randomly.
Pair Corralation between Yulon and Cathay Chemical
Assuming the 90 days trading horizon Yulon Motor Co is expected to under-perform the Cathay Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Yulon Motor Co is 1.02 times less risky than Cathay Chemical. The stock trades about -0.05 of its potential returns per unit of risk. The Cathay Chemical Works is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,358 in Cathay Chemical Works on August 31, 2024 and sell it today you would earn a total of 1,302 from holding Cathay Chemical Works or generate 38.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.46% |
| Values | Daily Returns |
Yulon Motor Co vs. Cathay Chemical Works
Performance |
| Timeline |
| Yulon Motor |
| Cathay Chemical Works |
Yulon and Cathay Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yulon and Cathay Chemical
The main advantage of trading using opposite Yulon and Cathay Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yulon position performs unexpectedly, Cathay Chemical 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 Cathay Chemical will offset losses from the drop in Cathay Chemical's long position.| Yulon vs. China Motor Corp | Yulon vs. China Steel Corp | Yulon vs. Nan Ya Plastics | Yulon vs. Chang Hwa Commercial |
| Cathay Chemical vs. Chung Hwa Chemical | Cathay Chemical vs. China Man Made Fiber | Cathay Chemical vs. Sesoda Corp | Cathay Chemical vs. Everlight Chemical Industrial |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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