Correlation Between U Ming and Phihong Technology

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

By analyzing existing cross correlation between U Ming Marine Transport and Phihong Technology Co, you can compare the effects of market volatilities on U Ming and Phihong Technology 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 U Ming with a short position of Phihong Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and Phihong Technology.

Diversification Opportunities for U Ming and Phihong Technology

0.6

Correlation Coefficient

U Ming  Phihong Technology

Poor diversification

The 3 months correlation between 2606 and Phihong is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Phihong Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phihong Technology and U Ming 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 U Ming Marine Transport are associated (or correlated) with Phihong Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phihong Technology has no effect on the direction of U Ming i.e., U Ming and Phihong Technology go up and down completely randomly.

Pair Corralation between U Ming and Phihong Technology

Assuming the 90 days trading horizon U Ming Marine Transport is expected to generate 0.66 times more return on investment than Phihong Technology. However, U Ming Marine Transport is 1.51 times less risky than Phihong Technology. It trades about 0.02 of its potential returns per unit of risk. Phihong Technology Co is currently generating about -0.05 per unit of risk. If you would invest  5,250  in U Ming Marine Transport on September 22, 2024 and sell it today you would earn a total of  50.00  from holding U Ming Marine Transport or generate 0.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

U Ming Marine Transport  vs.  Phihong Technology Co

U Ming Marine

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, U Ming is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Phihong Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phihong Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with U Ming and Phihong Technology

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

The idea behind U Ming Marine Transport and Phihong Technology Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.