Correlation Between Yulon and Chang Hwa
Can any of the company-specific risk be diversified away by investing in both Yulon and Chang Hwa 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 Chang Hwa 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 Chang Hwa Commercial, you can compare the effects of market volatilities on Yulon and Chang Hwa 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 Chang Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon and Chang Hwa.
Diversification Opportunities for Yulon and Chang Hwa
Very weak diversification
The 3 months correlation between Yulon and Chang is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Motor Co and Chang Hwa Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chang Hwa Commercial 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 Chang Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chang Hwa Commercial has no effect on the direction of Yulon i.e., Yulon and Chang Hwa go up and down completely randomly.
Pair Corralation between Yulon and Chang Hwa
Assuming the 90 days trading horizon Yulon Motor Co is expected to under-perform the Chang Hwa. In addition to that, Yulon is 4.37 times more volatile than Chang Hwa Commercial. It trades about -0.04 of its total potential returns per unit of risk. Chang Hwa Commercial is currently generating about -0.05 per unit of volatility. If you would invest 1,770 in Chang Hwa Commercial on September 1, 2024 and sell it today you would lose (10.00) from holding Chang Hwa Commercial or give up 0.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yulon Motor Co vs. Chang Hwa Commercial
Performance |
| Timeline |
| Yulon Motor |
| Chang Hwa Commercial |
Yulon and Chang Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yulon and Chang Hwa
The main advantage of trading using opposite Yulon and Chang Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yulon position performs unexpectedly, Chang Hwa 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 Chang Hwa will offset losses from the drop in Chang Hwa's long position.| Yulon vs. China Motor Corp | Yulon vs. China Steel Corp | Yulon vs. Nan Ya Plastics | Yulon vs. Chang Hwa Commercial |
| Chang Hwa vs. Central Reinsurance Corp | Chang Hwa vs. Huaku Development Co | Chang Hwa vs. Fubon Financial Holding |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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