Correlation Between Yang Ming and Chroma ATE

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

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

Diversification Opportunities for Yang Ming and Chroma ATE

0.65

Correlation Coefficient

Yang Ming  Chroma ATE

Poor diversification

The 3 months correlation between Yang and Chroma is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Chroma ATE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chroma ATE and Yang 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 Yang Ming Marine are associated (or correlated) with Chroma ATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chroma ATE has no effect on the direction of Yang Ming i.e., Yang Ming and Chroma ATE go up and down completely randomly.

Pair Corralation between Yang Ming and Chroma ATE

Assuming the 90 days trading horizon Yang Ming is expected to generate 1.57 times less return on investment than Chroma ATE. But when comparing it to its historical volatility, Yang Ming Marine is 1.22 times less risky than Chroma ATE. It trades about 0.14 of its potential returns per unit of risk. Chroma ATE is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  31,100  in Chroma ATE on September 4, 2024 and sell it today you would earn a total of  11,750  from holding Chroma ATE or generate 37.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Yang Ming Marine  vs.  Chroma ATE

Yang Ming Marine

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yang Ming showed solid returns over the last few months and may actually be approaching a breakup point.

Chroma ATE

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chroma ATE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chroma ATE showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yang Ming and Chroma ATE

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

The idea behind Yang Ming Marine and Chroma ATE 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.