Correlation Between Nan Ya and AOPEN
Can any of the company-specific risk be diversified away by investing in both Nan Ya and AOPEN 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 AOPEN 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 AOPEN Inc, you can compare the effects of market volatilities on Nan Ya and AOPEN 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 AOPEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and AOPEN.
Diversification Opportunities for Nan Ya and AOPEN
Poor diversification
The 3 months correlation between Nan and AOPEN is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and AOPEN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOPEN Inc 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 AOPEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOPEN Inc has no effect on the direction of Nan Ya i.e., Nan Ya and AOPEN go up and down completely randomly.
Pair Corralation between Nan Ya and AOPEN
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the AOPEN. In addition to that, Nan Ya is 1.48 times more volatile than AOPEN Inc. It trades about -0.1 of its total potential returns per unit of risk. AOPEN Inc is currently generating about -0.13 per unit of volatility. If you would invest 5,860 in AOPEN Inc on September 12, 2024 and sell it today you would lose (540.00) from holding AOPEN Inc or give up 9.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. AOPEN Inc
Performance |
| Timeline |
| Nan Ya Plastics |
| AOPEN Inc |
Nan Ya and AOPEN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and AOPEN
The main advantage of trading using opposite Nan Ya and AOPEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, AOPEN 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 AOPEN will offset losses from the drop in AOPEN'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 |
| AOPEN vs. Elite Semiconductor Memory | AOPEN vs. Tripod Technology Corp | AOPEN vs. Chenming Mold Industrial | AOPEN vs. Asia Optical Co |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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