Correlation Between Nan Ya and Uni President
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Uni President 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 Nan Ya and Uni President into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nan Ya Plastics and Uni President Enterprises Corp, you can compare the effects of market volatilities on Nan Ya and Uni President 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 Nan Ya with a short position of Uni President. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Uni President.
Diversification Opportunities for Nan Ya and Uni President
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nan and Uni is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Uni President Enterprises Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uni President Enterp and Nan Ya 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 Nan Ya Plastics are associated (or correlated) with Uni President. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uni President Enterp has no effect on the direction of Nan Ya i.e., Nan Ya and Uni President go up and down completely randomly.
Pair Corralation between Nan Ya and Uni President
Assuming the 90 days trading horizon Nan Ya Plastics is expected to generate 2.95 times more return on investment than Uni President. However, Nan Ya is 2.95 times more volatile than Uni President Enterprises Corp. It trades about 0.18 of its potential returns per unit of risk. Uni President Enterprises Corp is currently generating about -0.11 per unit of risk. If you would invest 2,990 in Nan Ya Plastics on November 3, 2024 and sell it today you would earn a total of 245.00 from holding Nan Ya Plastics or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. Uni President Enterprises Corp
Performance |
| Timeline |
| Nan Ya Plastics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Uni President Enterp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Nan Ya and Uni President Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Uni President
The main advantage of trading using opposite Nan Ya and Uni President positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Uni President 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 Uni President will offset losses from the drop in Uni President's long position.The idea behind Nan Ya Plastics and Uni President Enterprises Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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