Correlation Between Nan Ya and Ruentex Industries
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Ruentex Industries 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 Ruentex Industries 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 Ruentex Industries, you can compare the effects of market volatilities on Nan Ya and Ruentex Industries 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 Ruentex Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Ruentex Industries.
Diversification Opportunities for Nan Ya and Ruentex Industries
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nan and Ruentex is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Ruentex Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Industries 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 Ruentex Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Industries has no effect on the direction of Nan Ya i.e., Nan Ya and Ruentex Industries go up and down completely randomly.
Pair Corralation between Nan Ya and Ruentex Industries
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the Ruentex Industries. In addition to that, Nan Ya is 2.16 times more volatile than Ruentex Industries. It trades about -0.21 of its total potential returns per unit of risk. Ruentex Industries is currently generating about -0.32 per unit of volatility. If you would invest 8,040 in Ruentex Industries on October 26, 2024 and sell it today you would lose (1,120) from holding Ruentex Industries or give up 13.93% 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. Ruentex Industries
Performance |
| Timeline |
| Nan Ya Plastics |
| Ruentex Industries |
Nan Ya and Ruentex Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Ruentex Industries
The main advantage of trading using opposite Nan Ya and Ruentex Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Ruentex Industries 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 Ruentex Industries will offset losses from the drop in Ruentex Industries' 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 |
| Ruentex Industries vs. Ruentex Development Co | Ruentex Industries vs. Fubon Financial Holding | Ruentex Industries vs. Cathay Financial Holding | Ruentex Industries vs. Pou Chen 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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