Correlation Between U Ming and New Asia
Can any of the company-specific risk be diversified away by investing in both U Ming and New Asia 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 U Ming and New Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between U Ming Marine Transport and New Asia Construction, you can compare the effects of market volatilities on U Ming and New Asia 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 U Ming with a short position of New Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and New Asia.
Diversification Opportunities for U Ming and New Asia
Very poor diversification
The 3 months correlation between 2606 and New is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and New Asia Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Asia Construction and U Ming 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 U Ming Marine Transport are associated (or correlated) with New Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Asia Construction has no effect on the direction of U Ming i.e., U Ming and New Asia go up and down completely randomly.
Pair Corralation between U Ming and New Asia
Assuming the 90 days trading horizon U Ming is expected to generate 2.23 times less return on investment than New Asia. But when comparing it to its historical volatility, U Ming Marine Transport is 1.33 times less risky than New Asia. It trades about 0.04 of its potential returns per unit of risk. New Asia Construction is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 765.00 in New Asia Construction on September 12, 2024 and sell it today you would earn a total of 540.00 from holding New Asia Construction or generate 70.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Ming Marine Transport vs. New Asia Construction
Performance |
| Timeline |
| U Ming Marine |
| New Asia Construction |
U Ming and New Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Ming and New Asia
The main advantage of trading using opposite U Ming and New Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Ming position performs unexpectedly, New Asia 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 New Asia will offset losses from the drop in New Asia's long position.| U Ming vs. Yang Ming Marine | U Ming vs. Wan Hai Lines | U Ming vs. Taiwan Navigation Co | U Ming vs. China Airlines |
| New Asia vs. Yang Ming Marine | New Asia vs. Wan Hai Lines | New Asia vs. U Ming Marine Transport | New Asia vs. Taiwan Navigation 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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