Correlation Between Yulon and China Airlines
Can any of the company-specific risk be diversified away by investing in both Yulon and China Airlines 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 China Airlines 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 China Airlines, you can compare the effects of market volatilities on Yulon and China Airlines 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 China Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon and China Airlines.
Diversification Opportunities for Yulon and China Airlines
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Yulon and China is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Motor Co and China Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Airlines 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 China Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Airlines has no effect on the direction of Yulon i.e., Yulon and China Airlines go up and down completely randomly.
Pair Corralation between Yulon and China Airlines
Assuming the 90 days trading horizon Yulon Motor Co is expected to under-perform the China Airlines. In addition to that, Yulon is 1.12 times more volatile than China Airlines. It trades about 0.0 of its total potential returns per unit of risk. China Airlines is currently generating about 0.04 per unit of volatility. If you would invest 1,965 in China Airlines on August 30, 2024 and sell it today you would earn a total of 525.00 from holding China Airlines or generate 26.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yulon Motor Co vs. China Airlines
Performance |
| Timeline |
| Yulon Motor |
| China Airlines |
Yulon and China Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yulon and China Airlines
The main advantage of trading using opposite Yulon and China Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yulon position performs unexpectedly, China Airlines 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 China Airlines will offset losses from the drop in China Airlines' long position.| Yulon vs. China Motor Corp | Yulon vs. China Steel Corp | Yulon vs. Nan Ya Plastics | Yulon vs. Chang Hwa Commercial |
| China Airlines vs. Yulon Motor Co | China Airlines vs. Far Eastern Department | China Airlines vs. China Steel Corp | China Airlines vs. Chang Hwa Commercial |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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