Correlation Between Yulon and Chien Kuo
Can any of the company-specific risk be diversified away by investing in both Yulon and Chien Kuo 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 Chien Kuo 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 Chien Kuo Construction, you can compare the effects of market volatilities on Yulon and Chien Kuo 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 Chien Kuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon and Chien Kuo.
Diversification Opportunities for Yulon and Chien Kuo
Average diversification
The 3 months correlation between Yulon and Chien is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Motor Co and Chien Kuo Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chien Kuo Construction 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 Chien Kuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chien Kuo Construction has no effect on the direction of Yulon i.e., Yulon and Chien Kuo go up and down completely randomly.
Pair Corralation between Yulon and Chien Kuo
Assuming the 90 days trading horizon Yulon Motor Co is expected to under-perform the Chien Kuo. But the stock apears to be less risky and, when comparing its historical volatility, Yulon Motor Co is 1.33 times less risky than Chien Kuo. The stock trades about -0.04 of its potential returns per unit of risk. The Chien Kuo Construction is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,538 in Chien Kuo Construction on September 1, 2024 and sell it today you would earn a total of 187.00 from holding Chien Kuo Construction or generate 7.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yulon Motor Co vs. Chien Kuo Construction
Performance |
| Timeline |
| Yulon Motor |
| Chien Kuo Construction |
Yulon and Chien Kuo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yulon and Chien Kuo
The main advantage of trading using opposite Yulon and Chien Kuo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yulon position performs unexpectedly, Chien Kuo 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 Chien Kuo will offset losses from the drop in Chien Kuo's long position.| Yulon vs. China Motor Corp | Yulon vs. China Steel Corp | Yulon vs. Nan Ya Plastics | Yulon vs. Chang Hwa Commercial |
| Chien Kuo vs. BES Engineering Co | Chien Kuo vs. Continental Holdings Corp | Chien Kuo vs. Kee Tai Properties | Chien Kuo vs. Hung Sheng Construction |
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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