Correlation Between Yang Ming and Compal Electronics
Can any of the company-specific risk be diversified away by investing in both Yang Ming and Compal Electronics 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 Yang Ming and Compal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yang Ming Marine and Compal Electronics, you can compare the effects of market volatilities on Yang Ming and Compal Electronics 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 Yang Ming with a short position of Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yang Ming and Compal Electronics.
Diversification Opportunities for Yang Ming and Compal Electronics
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Yang and Compal is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics and Yang 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 Yang Ming Marine are associated (or correlated) with Compal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compal Electronics has no effect on the direction of Yang Ming i.e., Yang Ming and Compal Electronics go up and down completely randomly.
Pair Corralation between Yang Ming and Compal Electronics
Assuming the 90 days trading horizon Yang Ming Marine is expected to generate 1.28 times more return on investment than Compal Electronics. However, Yang Ming is 1.28 times more volatile than Compal Electronics. It trades about 0.05 of its potential returns per unit of risk. Compal Electronics is currently generating about 0.07 per unit of risk. If you would invest 4,496 in Yang Ming Marine on September 3, 2024 and sell it today you would earn a total of 2,824 from holding Yang Ming Marine or generate 62.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yang Ming Marine vs. Compal Electronics
Performance |
| Timeline |
| Yang Ming Marine |
| Compal Electronics |
Yang Ming and Compal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yang Ming and Compal Electronics
The main advantage of trading using opposite Yang Ming and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yang Ming position performs unexpectedly, Compal Electronics 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 Compal Electronics will offset losses from the drop in Compal Electronics' long position.| Yang Ming vs. Evergreen Marine Corp | Yang Ming vs. Wan Hai Lines | Yang Ming vs. China Airlines | Yang Ming vs. Eva Airways Corp |
| Compal Electronics vs. Taiwan Semiconductor Manufacturing | Compal Electronics vs. Yang Ming Marine | Compal Electronics vs. ASE Industrial Holding | Compal Electronics vs. AU Optronics |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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