Correlation Between Wan Hai and Yang Ming
Can any of the company-specific risk be diversified away by investing in both Wan Hai and Yang Ming 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 Wan Hai and Yang Ming into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wan Hai Lines and Yang Ming Marine, you can compare the effects of market volatilities on Wan Hai and Yang Ming 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 Wan Hai with a short position of Yang Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wan Hai and Yang Ming.
Diversification Opportunities for Wan Hai and Yang Ming
Very poor diversification
The 3 months correlation between Wan and Yang is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines and Yang Ming Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yang Ming Marine and Wan Hai 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 Wan Hai Lines are associated (or correlated) with Yang Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yang Ming Marine has no effect on the direction of Wan Hai i.e., Wan Hai and Yang Ming go up and down completely randomly.
Pair Corralation between Wan Hai and Yang Ming
Assuming the 90 days trading horizon Wan Hai is expected to generate 1.55 times less return on investment than Yang Ming. In addition to that, Wan Hai is 1.41 times more volatile than Yang Ming Marine. It trades about 0.14 of its total potential returns per unit of risk. Yang Ming Marine is currently generating about 0.31 per unit of volatility. If you would invest 6,850 in Yang Ming Marine on August 24, 2024 and sell it today you would earn a total of 1,080 from holding Yang Ming Marine or generate 15.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wan Hai Lines vs. Yang Ming Marine
Performance |
| Timeline |
| Wan Hai Lines |
| Yang Ming Marine |
Wan Hai and Yang Ming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wan Hai and Yang Ming
The main advantage of trading using opposite Wan Hai and Yang Ming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wan Hai position performs unexpectedly, Yang Ming 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 Yang Ming will offset losses from the drop in Yang Ming's long position.| Wan Hai vs. Sunny Friend Environmental | Wan Hai vs. Taiwan Secom Co | Wan Hai vs. TTET Union Corp | Wan Hai vs. ECOVE Environment Corp |
| Yang Ming vs. Sunny Friend Environmental | Yang Ming vs. Taiwan Secom Co | Yang Ming vs. TTET Union Corp | Yang Ming vs. ECOVE Environment Corp |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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