Correlation Between Yulon and Eternal Materials
Can any of the company-specific risk be diversified away by investing in both Yulon and Eternal Materials 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 Eternal Materials 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 Eternal Materials Co, you can compare the effects of market volatilities on Yulon and Eternal Materials 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 Eternal Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon and Eternal Materials.
Diversification Opportunities for Yulon and Eternal Materials
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Yulon and Eternal is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Motor Co and Eternal Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Materials 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 Eternal Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Materials has no effect on the direction of Yulon i.e., Yulon and Eternal Materials go up and down completely randomly.
Pair Corralation between Yulon and Eternal Materials
Assuming the 90 days trading horizon Yulon Motor Co is expected to under-perform the Eternal Materials. In addition to that, Yulon is 1.37 times more volatile than Eternal Materials Co. It trades about -0.07 of its total potential returns per unit of risk. Eternal Materials Co is currently generating about 0.01 per unit of volatility. If you would invest 2,935 in Eternal Materials Co on August 29, 2024 and sell it today you would earn a total of 55.00 from holding Eternal Materials Co or generate 1.87% 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. Eternal Materials Co
Performance |
| Timeline |
| Yulon Motor |
| Eternal Materials |
Yulon and Eternal Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yulon and Eternal Materials
The main advantage of trading using opposite Yulon and Eternal Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yulon position performs unexpectedly, Eternal Materials 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 Eternal Materials will offset losses from the drop in Eternal Materials' long position.| Yulon vs. China Motor Corp | Yulon vs. China Steel Corp | Yulon vs. Nan Ya Plastics | Yulon vs. Chang Hwa Commercial |
| Eternal Materials vs. Taiwan Fertilizer Co | Eternal Materials vs. Nan Ya Plastics | Eternal Materials vs. Formosa Chemicals Fibre | Eternal Materials vs. Far Eastern New |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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