Correlation Between Yang Ming and Bon Fame

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

Diversification Opportunities for Yang Ming and Bon Fame

-0.49

Correlation Coefficient

Yang Ming  Bon Fame

Very good diversification

The 3 months correlation between Yang and Bon is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Yang Ming Marine and Bon Fame Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bon Fame 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 Bon Fame. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bon Fame has no effect on the direction of Yang Ming i.e., Yang Ming and Bon Fame go up and down completely randomly.

Pair Corralation between Yang Ming and Bon Fame

Assuming the 90 days trading horizon Yang Ming Marine is expected to generate 0.96 times more return on investment than Bon Fame. However, Yang Ming Marine is 1.04 times less risky than Bon Fame. It trades about 0.12 of its potential returns per unit of risk. Bon Fame Co is currently generating about 0.08 per unit of risk. If you would invest  4,755  in Yang Ming Marine on February 7, 2024 and sell it today you would earn a total of  495.00  from holding Yang Ming Marine or generate 10.41% 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.  Bon Fame Co

Yang Ming Marine

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yang Ming Marine are ranked lower than 6 (%) 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.

Bon Fame

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bon Fame Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bon Fame showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yang Ming and Bon Fame

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

The idea behind Yang Ming Marine and Bon Fame 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.