Correlation Between Nan Ya and Lien Chang
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Lien Chang 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 Lien Chang 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 Lien Chang Electronic, you can compare the effects of market volatilities on Nan Ya and Lien Chang 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 Lien Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Lien Chang.
Diversification Opportunities for Nan Ya and Lien Chang
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nan and Lien is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Lien Chang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Chang Electronic 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 Lien Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Chang Electronic has no effect on the direction of Nan Ya i.e., Nan Ya and Lien Chang go up and down completely randomly.
Pair Corralation between Nan Ya and Lien Chang
Assuming the 90 days trading horizon Nan Ya Plastics is expected to generate 0.45 times more return on investment than Lien Chang. However, Nan Ya Plastics is 2.21 times less risky than Lien Chang. It trades about -0.35 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about -0.21 per unit of risk. If you would invest 4,095 in Nan Ya Plastics on September 13, 2024 and sell it today you would lose (495.00) from holding Nan Ya Plastics or give up 12.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. Lien Chang Electronic
Performance |
| Timeline |
| Nan Ya Plastics |
| Lien Chang Electronic |
Nan Ya and Lien Chang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Lien Chang
The main advantage of trading using opposite Nan Ya and Lien Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Lien Chang 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 Lien Chang will offset losses from the drop in Lien Chang's long position.| Nan Ya vs. Tainan Spinning Co | Nan Ya vs. Lealea Enterprise Co | Nan Ya vs. China Petrochemical Development | Nan Ya vs. Ruentex Development Co |
| Lien Chang vs. AU Optronics | Lien Chang vs. Innolux Corp | Lien Chang vs. Ruentex Development Co | Lien Chang vs. WiseChip Semiconductor |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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