Correlation Between ESUN Financial and Yuanta Financial
Can any of the company-specific risk be diversified away by investing in both ESUN Financial and Yuanta Financial 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 ESUN Financial and Yuanta Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESUN Financial Holding and Yuanta Financial Holdings, you can compare the effects of market volatilities on ESUN Financial and Yuanta Financial 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 ESUN Financial with a short position of Yuanta Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Yuanta Financial.
Diversification Opportunities for ESUN Financial and Yuanta Financial
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between ESUN and Yuanta is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Yuanta Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta Financial Holdings and ESUN Financial 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 ESUN Financial Holding are associated (or correlated) with Yuanta Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta Financial Holdings has no effect on the direction of ESUN Financial i.e., ESUN Financial and Yuanta Financial go up and down completely randomly.
Pair Corralation between ESUN Financial and Yuanta Financial
Assuming the 90 days trading horizon ESUN Financial is expected to generate 3.53 times less return on investment than Yuanta Financial. But when comparing it to its historical volatility, ESUN Financial Holding is 1.28 times less risky than Yuanta Financial. It trades about 0.03 of its potential returns per unit of risk. Yuanta Financial Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,280 in Yuanta Financial Holdings on November 2, 2024 and sell it today you would earn a total of 1,180 from holding Yuanta Financial Holdings or generate 51.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESUN Financial Holding vs. Yuanta Financial Holdings
Performance |
| Timeline |
| ESUN Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Yuanta Financial Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
ESUN Financial and Yuanta Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESUN Financial and Yuanta Financial
The main advantage of trading using opposite ESUN Financial and Yuanta Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESUN Financial position performs unexpectedly, Yuanta Financial 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 Yuanta Financial will offset losses from the drop in Yuanta Financial's long position.The idea behind ESUN Financial Holding and Yuanta Financial Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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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