Correlation Between YFY and Taiwan Glass

Can any of the company-specific risk be diversified away by investing in both YFY and Taiwan Glass 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 YFY and Taiwan Glass into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between YFY Inc and Taiwan Glass Ind, you can compare the effects of market volatilities on YFY and Taiwan Glass 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 YFY with a short position of Taiwan Glass. Check out your portfolio center. Please also check ongoing floating volatility patterns of YFY and Taiwan Glass.

Diversification Opportunities for YFY and Taiwan Glass

0.26

Correlation Coefficient

YFY  Taiwan Glass

Modest diversification

The 3 months correlation between YFY and Taiwan is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding YFY Inc and Taiwan Glass Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Glass Ind and YFY 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 YFY Inc are associated (or correlated) with Taiwan Glass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Glass Ind has no effect on the direction of YFY i.e., YFY and Taiwan Glass go up and down completely randomly.

Pair Corralation between YFY and Taiwan Glass

Assuming the 90 days trading horizon YFY is expected to generate 7.61 times less return on investment than Taiwan Glass. But when comparing it to its historical volatility, YFY Inc is 2.36 times less risky than Taiwan Glass. It trades about 0.04 of its potential returns per unit of risk. Taiwan Glass Ind is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,550  in Taiwan Glass Ind on September 12, 2024 and sell it today you would earn a total of  400.00  from holding Taiwan Glass Ind or generate 25.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

YFY Inc  vs.  Taiwan Glass Ind

YFY Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YFY Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, YFY is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taiwan Glass Ind

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Glass Ind are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Glass showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YFY and Taiwan Glass

The main advantage of trading using opposite YFY and Taiwan Glass positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YFY position performs unexpectedly, Taiwan Glass 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 Taiwan Glass will offset losses from the drop in Taiwan Glass' long position.

The idea behind YFY Inc and Taiwan Glass Ind 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.