Correlation Between Yieh United and Wei Chih
Can any of the company-specific risk be diversified away by investing in both Yieh United and Wei Chih 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 Yieh United and Wei Chih into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yieh United Steel and Wei Chih Steel, you can compare the effects of market volatilities on Yieh United and Wei Chih 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 Yieh United with a short position of Wei Chih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yieh United and Wei Chih.
Diversification Opportunities for Yieh United and Wei Chih
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Yieh and Wei is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Yieh United Steel and Wei Chih Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wei Chih Steel and Yieh United 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 Yieh United Steel are associated (or correlated) with Wei Chih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wei Chih Steel has no effect on the direction of Yieh United i.e., Yieh United and Wei Chih go up and down completely randomly.
Pair Corralation between Yieh United and Wei Chih
Assuming the 90 days trading horizon Yieh United Steel is expected to generate 0.96 times more return on investment than Wei Chih. However, Yieh United Steel is 1.04 times less risky than Wei Chih. It trades about 0.01 of its potential returns per unit of risk. Wei Chih Steel is currently generating about -0.1 per unit of risk. If you would invest 638.00 in Yieh United Steel on September 3, 2024 and sell it today you would earn a total of 1.00 from holding Yieh United Steel or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yieh United Steel vs. Wei Chih Steel
Performance |
| Timeline |
| Yieh United Steel |
| Wei Chih Steel |
Yieh United and Wei Chih Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yieh United and Wei Chih
The main advantage of trading using opposite Yieh United and Wei Chih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yieh United position performs unexpectedly, Wei Chih 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 Wei Chih will offset losses from the drop in Wei Chih's long position.The idea behind Yieh United Steel and Wei Chih Steel 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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