Correlation Between Yang Ming and Kao Fong
Can any of the company-specific risk be diversified away by investing in both Yang Ming and Kao Fong 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 Kao Fong 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 Kao Fong Machinery, you can compare the effects of market volatilities on Yang Ming and Kao Fong 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 Kao Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yang Ming and Kao Fong.
Diversification Opportunities for Yang Ming and Kao Fong
Very good diversification
The 3 months correlation between Yang and Kao is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Kao Fong Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kao Fong Machinery 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 Kao Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kao Fong Machinery has no effect on the direction of Yang Ming i.e., Yang Ming and Kao Fong go up and down completely randomly.
Pair Corralation between Yang Ming and Kao Fong
Assuming the 90 days trading horizon Yang Ming is expected to generate 2.06 times less return on investment than Kao Fong. But when comparing it to its historical volatility, Yang Ming Marine is 1.53 times less risky than Kao Fong. It trades about 0.11 of its potential returns per unit of risk. Kao Fong Machinery is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,800 in Kao Fong Machinery on September 3, 2024 and sell it today you would earn a total of 2,985 from holding Kao Fong Machinery or generate 165.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yang Ming Marine vs. Kao Fong Machinery
Performance |
| Timeline |
| Yang Ming Marine |
| Kao Fong Machinery |
Yang Ming and Kao Fong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yang Ming and Kao Fong
The main advantage of trading using opposite Yang Ming and Kao Fong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yang Ming position performs unexpectedly, Kao Fong 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 Kao Fong will offset losses from the drop in Kao Fong'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 |
| Kao Fong vs. Airtac International Group | Kao Fong vs. TECO Electric Machinery | Kao Fong vs. Chung Hsin Electric Machinery | Kao Fong vs. Ruentex Development 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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