Correlation Between Nan Ya and United Microelectronics
Can any of the company-specific risk be diversified away by investing in both Nan Ya and United Microelectronics 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 United Microelectronics 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 United Microelectronics, you can compare the effects of market volatilities on Nan Ya and United Microelectronics 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 United Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and United Microelectronics.
Diversification Opportunities for Nan Ya and United Microelectronics
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nan and United is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics 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 United Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Microelectronics has no effect on the direction of Nan Ya i.e., Nan Ya and United Microelectronics go up and down completely randomly.
Pair Corralation between Nan Ya and United Microelectronics
Assuming the 90 days trading horizon Nan Ya Plastics is expected to generate 1.5 times more return on investment than United Microelectronics. However, Nan Ya is 1.5 times more volatile than United Microelectronics. It trades about -0.08 of its potential returns per unit of risk. United Microelectronics is currently generating about -0.43 per unit of risk. If you would invest 4,135 in Nan Ya Plastics on August 26, 2024 and sell it today you would lose (135.00) from holding Nan Ya Plastics or give up 3.26% 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. United Microelectronics
Performance |
| Timeline |
| Nan Ya Plastics |
| United Microelectronics |
Nan Ya and United Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and United Microelectronics
The main advantage of trading using opposite Nan Ya and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, United Microelectronics 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 United Microelectronics will offset losses from the drop in United Microelectronics' 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 |
| United Microelectronics vs. Novatek Microelectronics Corp | United Microelectronics vs. Quanta Computer |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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