Correlation Between Yulon and Tung Ho
Can any of the company-specific risk be diversified away by investing in both Yulon and Tung Ho 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 Tung Ho 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 Tung Ho Steel, you can compare the effects of market volatilities on Yulon and Tung Ho 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 Tung Ho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon and Tung Ho.
Diversification Opportunities for Yulon and Tung Ho
Good diversification
The 3 months correlation between Yulon and Tung is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Motor Co and Tung Ho Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Ho Steel 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 Tung Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Ho Steel has no effect on the direction of Yulon i.e., Yulon and Tung Ho go up and down completely randomly.
Pair Corralation between Yulon and Tung Ho
Assuming the 90 days trading horizon Yulon Motor Co is expected to under-perform the Tung Ho. In addition to that, Yulon is 1.59 times more volatile than Tung Ho Steel. It trades about -0.03 of its total potential returns per unit of risk. Tung Ho Steel is currently generating about 0.06 per unit of volatility. If you would invest 5,690 in Tung Ho Steel on August 29, 2024 and sell it today you would earn a total of 1,570 from holding Tung Ho Steel or generate 27.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yulon Motor Co vs. Tung Ho Steel
Performance |
| Timeline |
| Yulon Motor |
| Tung Ho Steel |
Yulon and Tung Ho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yulon and Tung Ho
The main advantage of trading using opposite Yulon and Tung Ho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yulon position performs unexpectedly, Tung Ho 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 Tung Ho will offset losses from the drop in Tung Ho's long position.| Yulon vs. Taiwan Semiconductor Manufacturing | Yulon vs. Hon Hai Precision | Yulon vs. MediaTek | Yulon vs. Chunghwa Telecom Co |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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