Correlation Between Chief Telecom and Yao Sheng

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

By analyzing existing cross correlation between Chief Telecom and Yao Sheng Electronic, you can compare the effects of market volatilities on Chief Telecom and Yao 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 Chief Telecom with a short position of Yao Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chief Telecom and Yao Sheng.

Diversification Opportunities for Chief Telecom and Yao Sheng

0.39

Correlation Coefficient

Chief Telecom  Yao Sheng

Weak diversification

The 3 months correlation between Chief and Yao is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Chief Telecom and Yao Sheng Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yao Sheng Electronic and Chief Telecom 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 Chief Telecom are associated (or correlated) with Yao Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yao Sheng Electronic has no effect on the direction of Chief Telecom i.e., Chief Telecom and Yao Sheng go up and down completely randomly.

Pair Corralation between Chief Telecom and Yao Sheng

Assuming the 90 days trading horizon Chief Telecom is expected to generate 16.32 times less return on investment than Yao Sheng. But when comparing it to its historical volatility, Chief Telecom is 2.84 times less risky than Yao Sheng. It trades about 0.04 of its potential returns per unit of risk. Yao Sheng Electronic is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  9,040  in Yao Sheng Electronic on February 19, 2024 and sell it today you would earn a total of  5,960  from holding Yao Sheng Electronic or generate 65.93% return on investment over 90 days.

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

Chief Telecom  vs.  Yao Sheng Electronic

Chief Telecom

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chief Telecom are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chief Telecom is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Yao Sheng Electronic

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with Chief Telecom and Yao Sheng

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

The idea behind Chief Telecom and Yao Sheng Electronic 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.