Correlation Between Yulon and Yeou Yih
Can any of the company-specific risk be diversified away by investing in both Yulon and Yeou Yih 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 Yeou Yih 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 Yeou Yih Steel, you can compare the effects of market volatilities on Yulon and Yeou Yih 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 Yeou Yih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon and Yeou Yih.
Diversification Opportunities for Yulon and Yeou Yih
Poor diversification
The 3 months correlation between Yulon and Yeou is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Motor Co and Yeou Yih Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yeou Yih 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 Yeou Yih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yeou Yih Steel has no effect on the direction of Yulon i.e., Yulon and Yeou Yih go up and down completely randomly.
Pair Corralation between Yulon and Yeou Yih
Assuming the 90 days trading horizon Yulon Motor Co is expected to under-perform the Yeou Yih. In addition to that, Yulon is 3.36 times more volatile than Yeou Yih Steel. It trades about -0.06 of its total potential returns per unit of risk. Yeou Yih Steel is currently generating about -0.07 per unit of volatility. If you would invest 1,565 in Yeou Yih Steel on August 27, 2024 and sell it today you would lose (15.00) from holding Yeou Yih Steel or give up 0.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yulon Motor Co vs. Yeou Yih Steel
Performance |
| Timeline |
| Yulon Motor |
| Yeou Yih Steel |
Yulon and Yeou Yih Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yulon and Yeou Yih
The main advantage of trading using opposite Yulon and Yeou Yih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yulon position performs unexpectedly, Yeou Yih 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 Yeou Yih will offset losses from the drop in Yeou Yih's long position.| Yulon vs. China Motor Corp | Yulon vs. China Steel Corp | Yulon vs. Nan Ya Plastics | Yulon 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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