Correlation Between Nan Ya and E Lead
Can any of the company-specific risk be diversified away by investing in both Nan Ya and E Lead 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 E Lead 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 E Lead Electronic Co, you can compare the effects of market volatilities on Nan Ya and E Lead 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 E Lead. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and E Lead.
Diversification Opportunities for Nan Ya and E Lead
Very poor diversification
The 3 months correlation between Nan and 2497 is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and E Lead Electronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Lead 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 E Lead. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Lead Electronic has no effect on the direction of Nan Ya i.e., Nan Ya and E Lead go up and down completely randomly.
Pair Corralation between Nan Ya and E Lead
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the E Lead. In addition to that, Nan Ya is 1.19 times more volatile than E Lead Electronic Co. It trades about -0.19 of its total potential returns per unit of risk. E Lead Electronic Co is currently generating about -0.21 per unit of volatility. If you would invest 7,470 in E Lead Electronic Co on October 26, 2024 and sell it today you would lose (1,640) from holding E Lead Electronic Co or give up 21.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. E Lead Electronic Co
Performance |
| Timeline |
| Nan Ya Plastics |
| E Lead Electronic |
Nan Ya and E Lead Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and E Lead
The main advantage of trading using opposite Nan Ya and E Lead positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, E Lead 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 E Lead will offset losses from the drop in E Lead's 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 |
| E Lead vs. Weltrend Semiconductor | E Lead vs. Catcher Technology Co | E Lead vs. Cub Elecparts | E Lead vs. Elan Microelectronics Corp |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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