Correlation Between Choice Development and Yang Ming
Can any of the company-specific risk be diversified away by investing in both Choice Development 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 Choice Development and Yang Ming into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Choice Development and Yang Ming Marine, you can compare the effects of market volatilities on Choice Development 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 Choice Development with a short position of Yang Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Development and Yang Ming.
Diversification Opportunities for Choice Development and Yang Ming
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Choice and Yang is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Choice Development 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 Choice Development 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 Choice Development 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 Choice Development i.e., Choice Development and Yang Ming go up and down completely randomly.
Pair Corralation between Choice Development and Yang Ming
Assuming the 90 days trading horizon Choice Development is expected to generate 2.03 times less return on investment than Yang Ming. But when comparing it to its historical volatility, Choice Development is 1.27 times less risky than Yang Ming. It trades about 0.05 of its potential returns per unit of risk. Yang Ming Marine is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,310 in Yang Ming Marine on September 12, 2024 and sell it today you would earn a total of 3,740 from holding Yang Ming Marine or generate 86.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Development vs. Yang Ming Marine
Performance |
| Timeline |
| Choice Development |
| Yang Ming Marine |
Choice Development and Yang Ming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Development and Yang Ming
The main advantage of trading using opposite Choice Development and Yang Ming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Development 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.| Choice Development vs. Yang Ming Marine | Choice Development vs. Wan Hai Lines | Choice Development vs. U Ming Marine Transport | Choice Development vs. Taiwan Navigation Co |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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