Correlation Between Nan Ya and USI Corp
Can any of the company-specific risk be diversified away by investing in both Nan Ya and USI Corp 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 USI Corp 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 USI Corp, you can compare the effects of market volatilities on Nan Ya and USI Corp 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 USI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and USI Corp.
Diversification Opportunities for Nan Ya and USI Corp
Very poor diversification
The 3 months correlation between Nan and USI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and USI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USI Corp 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 USI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USI Corp has no effect on the direction of Nan Ya i.e., Nan Ya and USI Corp go up and down completely randomly.
Pair Corralation between Nan Ya and USI Corp
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the USI Corp. But the stock apears to be less risky and, when comparing its historical volatility, Nan Ya Plastics is 1.01 times less risky than USI Corp. The stock trades about -0.1 of its potential returns per unit of risk. The USI Corp is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 1,490 in USI Corp on August 29, 2024 and sell it today you would lose (150.00) from holding USI Corp or give up 10.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. USI Corp
Performance |
| Timeline |
| Nan Ya Plastics |
| USI Corp |
Nan Ya and USI Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and USI Corp
The main advantage of trading using opposite Nan Ya and USI Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, USI Corp 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 USI Corp will offset losses from the drop in USI Corp's long position.| Nan Ya vs. Formosa Plastics Corp | Nan Ya vs. Formosa Chemicals Fibre | Nan Ya vs. China Steel Corp | Nan Ya vs. Formosa Petrochemical Corp |
| USI Corp vs. China Man Made Fiber | USI Corp vs. China Petrochemical Development | USI Corp vs. Yulon Motor Co |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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