Correlation Between Yuan Jen and Zig Sheng

Can any of the company-specific risk be diversified away by investing in both Yuan Jen and Zig Sheng 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 Yuan Jen and Zig Sheng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yuan Jen Enterprises and Zig Sheng Industrial, you can compare the effects of market volatilities on Yuan Jen and Zig Sheng 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 Yuan Jen with a short position of Zig Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuan Jen and Zig Sheng.

Diversification Opportunities for Yuan Jen and Zig Sheng

0.76

Correlation Coefficient

Yuan Jen  Zig Sheng

Poor diversification

The 3 months correlation between Yuan and Zig is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Yuan Jen Enterprises and Zig Sheng Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zig Sheng Industrial and Yuan Jen 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 Yuan Jen Enterprises are associated (or correlated) with Zig Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zig Sheng Industrial has no effect on the direction of Yuan Jen i.e., Yuan Jen and Zig Sheng go up and down completely randomly.

Pair Corralation between Yuan Jen and Zig Sheng

Assuming the 90 days trading horizon Yuan Jen Enterprises is expected to generate 2.14 times more return on investment than Zig Sheng. However, Yuan Jen is 2.14 times more volatile than Zig Sheng Industrial. It trades about 0.21 of its potential returns per unit of risk. Zig Sheng Industrial is currently generating about 0.14 per unit of risk. If you would invest  3,360  in Yuan Jen Enterprises on February 12, 2024 and sell it today you would earn a total of  780.00  from holding Yuan Jen Enterprises or generate 23.21% return on investment over 90 days.

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

Yuan Jen Enterprises  vs.  Zig Sheng Industrial

Yuan Jen Enterprises

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Yuan Jen Enterprises are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yuan Jen showed solid returns over the last few months and may actually be approaching a breakup point.

Zig Sheng Industrial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zig Sheng Industrial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Zig Sheng showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yuan Jen and Zig Sheng

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

The idea behind Yuan Jen Enterprises and Zig Sheng Industrial 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..