Correlation Between Nan Ya and Oriental Union
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Oriental Union 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 Oriental Union 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 Oriental Union Chemical, you can compare the effects of market volatilities on Nan Ya and Oriental Union 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 Oriental Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Oriental Union.
Diversification Opportunities for Nan Ya and Oriental Union
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nan and Oriental is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Oriental Union Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Union Chemical 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 Oriental Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Union Chemical has no effect on the direction of Nan Ya i.e., Nan Ya and Oriental Union go up and down completely randomly.
Pair Corralation between Nan Ya and Oriental Union
Assuming the 90 days trading horizon Nan Ya Plastics is expected to generate 1.81 times more return on investment than Oriental Union. However, Nan Ya is 1.81 times more volatile than Oriental Union Chemical. It trades about -0.16 of its potential returns per unit of risk. Oriental Union Chemical is currently generating about -0.42 per unit of risk. If you would invest 4,185 in Nan Ya Plastics on August 30, 2024 and sell it today you would lose (250.00) from holding Nan Ya Plastics or give up 5.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. Oriental Union Chemical
Performance |
| Timeline |
| Nan Ya Plastics |
| Oriental Union Chemical |
Nan Ya and Oriental Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Oriental Union
The main advantage of trading using opposite Nan Ya and Oriental Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Oriental Union 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 Oriental Union will offset losses from the drop in Oriental Union'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 |
| Oriental Union vs. China Man Made Fiber | Oriental Union vs. Taiwan Styrene Monomer | Oriental Union vs. USI Corp | Oriental Union vs. China Petrochemical Development |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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