Correlation Between Yang Ming and Zhen Ding

Can any of the company-specific risk be diversified away by investing in both Yang Ming and Zhen Ding 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 Zhen Ding 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 Zhen Ding Technology, you can compare the effects of market volatilities on Yang Ming and Zhen Ding 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 Zhen Ding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yang Ming and Zhen Ding.

Diversification Opportunities for Yang Ming and Zhen Ding

-0.26

Correlation Coefficient

Yang Ming  Zhen Ding

Very good diversification

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

Pair Corralation between Yang Ming and Zhen Ding

Assuming the 90 days trading horizon Yang Ming Marine is expected to generate 1.35 times more return on investment than Zhen Ding. However, Yang Ming is 1.35 times more volatile than Zhen Ding Technology. It trades about 0.12 of its potential returns per unit of risk. Zhen Ding Technology is currently generating about -0.12 per unit of risk. If you would invest  6,180  in Yang Ming Marine on September 3, 2024 and sell it today you would earn a total of  1,140  from holding Yang Ming Marine or generate 18.45% return on investment over 90 days.

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

Yang Ming Marine  vs.  Zhen Ding Technology

Yang Ming Marine

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 9 (%) 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.

Zhen Ding Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhen Ding Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Yang Ming and Zhen Ding

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

The idea behind Yang Ming Marine and Zhen Ding Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.