Correlation Between Taiwan Navigation and Yang Ming
Can any of the company-specific risk be diversified away by investing in both Taiwan Navigation 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 Taiwan Navigation and Yang Ming into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Navigation Co and Yang Ming Marine, you can compare the effects of market volatilities on Taiwan Navigation 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 Taiwan Navigation with a short position of Yang Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Navigation and Yang Ming.
Diversification Opportunities for Taiwan Navigation and Yang Ming
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Yang is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co 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 Taiwan Navigation 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 Taiwan Navigation Co 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 Taiwan Navigation i.e., Taiwan Navigation and Yang Ming go up and down completely randomly.
Pair Corralation between Taiwan Navigation and Yang Ming
Assuming the 90 days trading horizon Taiwan Navigation is expected to generate 7.36 times less return on investment than Yang Ming. But when comparing it to its historical volatility, Taiwan Navigation Co is 1.52 times less risky than Yang Ming. It trades about 0.01 of its potential returns per unit of risk. Yang Ming Marine is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,170 in Yang Ming Marine on August 28, 2024 and sell it today you would earn a total of 2,480 from holding Yang Ming Marine or generate 47.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Navigation Co vs. Yang Ming Marine
Performance |
| Timeline |
| Taiwan Navigation |
| Yang Ming Marine |
Taiwan Navigation and Yang Ming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Navigation and Yang Ming
The main advantage of trading using opposite Taiwan Navigation and Yang Ming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Navigation 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.| Taiwan Navigation vs. Sunny Friend Environmental | Taiwan Navigation vs. TTET Union Corp | Taiwan Navigation vs. ECOVE Environment Corp | Taiwan Navigation vs. Yulon Finance Corp |
| Yang Ming vs. Evergreen Marine Corp | Yang Ming vs. Wan Hai Lines | Yang Ming vs. China Airlines | Yang Ming vs. Eva Airways 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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