Correlation Between Nan Ya and YFY
Can any of the company-specific risk be diversified away by investing in both Nan Ya and YFY 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 YFY 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 YFY Inc, you can compare the effects of market volatilities on Nan Ya and YFY 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 YFY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and YFY.
Diversification Opportunities for Nan Ya and YFY
Poor diversification
The 3 months correlation between Nan and YFY is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and YFY Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YFY Inc 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 YFY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YFY Inc has no effect on the direction of Nan Ya i.e., Nan Ya and YFY go up and down completely randomly.
Pair Corralation between Nan Ya and YFY
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the YFY. But the stock apears to be less risky and, when comparing its historical volatility, Nan Ya Plastics is 1.33 times less risky than YFY. The stock trades about -0.09 of its potential returns per unit of risk. The YFY Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,515 in YFY Inc on September 3, 2024 and sell it today you would earn a total of 535.00 from holding YFY Inc or generate 21.27% 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. YFY Inc
Performance |
| Timeline |
| Nan Ya Plastics |
| YFY Inc |
Nan Ya and YFY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and YFY
The main advantage of trading using opposite Nan Ya and YFY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, YFY 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 YFY will offset losses from the drop in YFY's long position.The idea behind Nan Ya Plastics and YFY Inc 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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