Correlation Between Yang Ming and Wha Yu
Can any of the company-specific risk be diversified away by investing in both Yang Ming and Wha Yu 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 Wha Yu 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 Wha Yu Industrial, you can compare the effects of market volatilities on Yang Ming and Wha Yu 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 Wha Yu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yang Ming and Wha Yu.
Diversification Opportunities for Yang Ming and Wha Yu
Poor diversification
The 3 months correlation between Yang and Wha is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Wha Yu Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wha Yu Industrial 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 Wha Yu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wha Yu Industrial has no effect on the direction of Yang Ming i.e., Yang Ming and Wha Yu go up and down completely randomly.
Pair Corralation between Yang Ming and Wha Yu
Assuming the 90 days trading horizon Yang Ming is expected to generate 2.21 times less return on investment than Wha Yu. But when comparing it to its historical volatility, Yang Ming Marine is 1.46 times less risky than Wha Yu. It trades about 0.16 of its potential returns per unit of risk. Wha Yu Industrial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,645 in Wha Yu Industrial on September 3, 2024 and sell it today you would earn a total of 285.00 from holding Wha Yu Industrial or generate 17.33% 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. Wha Yu Industrial
Performance |
| Timeline |
| Yang Ming Marine |
| Wha Yu Industrial |
Yang Ming and Wha Yu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yang Ming and Wha Yu
The main advantage of trading using opposite Yang Ming and Wha Yu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yang Ming position performs unexpectedly, Wha Yu 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 Wha Yu will offset losses from the drop in Wha Yu's 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 |
| Wha Yu vs. Taiwan Semiconductor Manufacturing | Wha Yu vs. Yang Ming Marine | Wha Yu vs. ASE Industrial Holding | Wha Yu 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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