Correlation Between Yang Ming and TBI Motion

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

Diversification Opportunities for Yang Ming and TBI Motion

-0.46

Correlation Coefficient

Yang Ming  TBI Motion

Very good diversification

The 3 months correlation between Yang and TBI is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and TBI Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TBI Motion 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 TBI Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TBI Motion Technology has no effect on the direction of Yang Ming i.e., Yang Ming and TBI Motion go up and down completely randomly.

Pair Corralation between Yang Ming and TBI Motion

Assuming the 90 days trading horizon Yang Ming Marine is expected to generate 1.59 times more return on investment than TBI Motion. However, Yang Ming is 1.59 times more volatile than TBI Motion Technology. It trades about 0.23 of its potential returns per unit of risk. TBI Motion Technology is currently generating about -0.23 per unit of risk. If you would invest  4,510  in Yang Ming Marine on February 4, 2024 and sell it today you would earn a total of  530.00  from holding Yang Ming Marine or generate 11.75% return on investment over 90 days.

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

Yang Ming Marine  vs.  TBI Motion Technology

Yang Ming Marine

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yang Ming may actually be approaching a critical reversion point that can send shares even higher in June 2024.

TBI Motion Technology

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Yang Ming and TBI Motion

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

The idea behind Yang Ming Marine and TBI Motion 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.