Correlation Between Nan Ya and Transcend Information
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Transcend Information 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 Transcend Information 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 Transcend Information, you can compare the effects of market volatilities on Nan Ya and Transcend Information 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 Transcend Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Transcend Information.
Diversification Opportunities for Nan Ya and Transcend Information
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nan and Transcend is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Transcend Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcend Information 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 Transcend Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcend Information has no effect on the direction of Nan Ya i.e., Nan Ya and Transcend Information go up and down completely randomly.
Pair Corralation between Nan Ya and Transcend Information
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the Transcend Information. But the stock apears to be less risky and, when comparing its historical volatility, Nan Ya Plastics is 1.11 times less risky than Transcend Information. The stock trades about -0.13 of its potential returns per unit of risk. The Transcend Information is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 8,340 in Transcend Information on September 5, 2024 and sell it today you would earn a total of 790.00 from holding Transcend Information or generate 9.47% 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. Transcend Information
Performance |
| Timeline |
| Nan Ya Plastics |
| Transcend Information |
Nan Ya and Transcend Information Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Transcend Information
The main advantage of trading using opposite Nan Ya and Transcend Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Transcend Information 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 Transcend Information will offset losses from the drop in Transcend Information's long position.The idea behind Nan Ya Plastics and Transcend Information 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.| Transcend Information vs. Taiwan Semiconductor Manufacturing | Transcend Information vs. Yang Ming Marine | Transcend Information vs. AU Optronics | Transcend Information vs. Nan Ya Plastics |
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 Stocks Directory module to find actively traded stocks across global markets.
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