Correlation Between Nan Ya and TECO Electric
Can any of the company-specific risk be diversified away by investing in both Nan Ya and TECO Electric 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 TECO Electric 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 TECO Electric Machinery, you can compare the effects of market volatilities on Nan Ya and TECO Electric 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 TECO Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and TECO Electric.
Diversification Opportunities for Nan Ya and TECO Electric
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nan and TECO is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and TECO Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TECO Electric Machinery 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 TECO Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TECO Electric Machinery has no effect on the direction of Nan Ya i.e., Nan Ya and TECO Electric go up and down completely randomly.
Pair Corralation between Nan Ya and TECO Electric
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the TECO Electric. But the stock apears to be less risky and, when comparing its historical volatility, Nan Ya Plastics is 1.58 times less risky than TECO Electric. The stock trades about -0.09 of its potential returns per unit of risk. The TECO Electric Machinery is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,800 in TECO Electric Machinery on August 30, 2024 and sell it today you would earn a total of 2,500 from holding TECO Electric Machinery or generate 89.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. TECO Electric Machinery
Performance |
| Timeline |
| Nan Ya Plastics |
| TECO Electric Machinery |
Nan Ya and TECO Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and TECO Electric
The main advantage of trading using opposite Nan Ya and TECO Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, TECO Electric 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 TECO Electric will offset losses from the drop in TECO Electric'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 |
| TECO Electric vs. Yulon Motor Co | TECO Electric vs. Far Eastern Department | TECO Electric vs. China Steel Corp | TECO Electric vs. Chang Hwa Commercial |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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