Correlation Between Nan Ya and China Petrochemical
Can any of the company-specific risk be diversified away by investing in both Nan Ya and China Petrochemical 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 China Petrochemical 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 China Petrochemical Development, you can compare the effects of market volatilities on Nan Ya and China Petrochemical 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 China Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and China Petrochemical.
Diversification Opportunities for Nan Ya and China Petrochemical
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nan and China is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and China Petrochemical Developmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petrochemical 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 China Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petrochemical has no effect on the direction of Nan Ya i.e., Nan Ya and China Petrochemical go up and down completely randomly.
Pair Corralation between Nan Ya and China Petrochemical
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the China Petrochemical. In addition to that, Nan Ya is 1.2 times more volatile than China Petrochemical Development. It trades about -0.14 of its total potential returns per unit of risk. China Petrochemical Development is currently generating about 0.07 per unit of volatility. If you would invest 818.00 in China Petrochemical Development on August 29, 2024 and sell it today you would earn a total of 15.00 from holding China Petrochemical Development or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. China Petrochemical Developmen
Performance |
| Timeline |
| Nan Ya Plastics |
| China Petrochemical |
Nan Ya and China Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and China Petrochemical
The main advantage of trading using opposite Nan Ya and China Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, China Petrochemical 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 China Petrochemical will offset losses from the drop in China Petrochemical'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 |
| China Petrochemical vs. USI Corp | China Petrochemical vs. Grand Pacific Petrochemical | China Petrochemical vs. Taiwan Styrene Monomer | China Petrochemical vs. China Steel Corp |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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