Correlation Between Nan Ya and Wei Chih
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Wei Chih 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 Wei Chih 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 Wei Chih Steel, you can compare the effects of market volatilities on Nan Ya and Wei Chih 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 Wei Chih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Wei Chih.
Diversification Opportunities for Nan Ya and Wei Chih
Poor diversification
The 3 months correlation between Nan and Wei is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Wei Chih Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wei Chih Steel 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 Wei Chih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wei Chih Steel has no effect on the direction of Nan Ya i.e., Nan Ya and Wei Chih go up and down completely randomly.
Pair Corralation between Nan Ya and Wei Chih
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the Wei Chih. But the stock apears to be less risky and, when comparing its historical volatility, Nan Ya Plastics is 1.26 times less risky than Wei Chih. The stock trades about -0.12 of its potential returns per unit of risk. The Wei Chih Steel is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,638 in Wei Chih Steel on August 31, 2024 and sell it today you would lose (388.00) from holding Wei Chih Steel or give up 14.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.46% |
| Values | Daily Returns |
Nan Ya Plastics vs. Wei Chih Steel
Performance |
| Timeline |
| Nan Ya Plastics |
| Wei Chih Steel |
Nan Ya and Wei Chih Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Wei Chih
The main advantage of trading using opposite Nan Ya and Wei Chih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Wei Chih 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 Wei Chih will offset losses from the drop in Wei Chih's long position.| Nan Ya vs. Basso Industry Corp | Nan Ya vs. Chung Hsin Electric Machinery | Nan Ya vs. TYC Brother Industrial | Nan Ya vs. TECO Electric Machinery |
| Wei Chih vs. Basso Industry Corp | Wei Chih vs. Chung Hsin Electric Machinery | Wei Chih vs. TYC Brother Industrial | Wei Chih vs. TECO Electric Machinery |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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