Correlation Between Nan Ya and Double Bond
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Double Bond 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 Double Bond 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 Double Bond Chemical, you can compare the effects of market volatilities on Nan Ya and Double Bond 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 Double Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Double Bond.
Diversification Opportunities for Nan Ya and Double Bond
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Nan and Double is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Double Bond Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Double Bond Chemical 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 Double Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Double Bond Chemical has no effect on the direction of Nan Ya i.e., Nan Ya and Double Bond go up and down completely randomly.
Pair Corralation between Nan Ya and Double Bond
Assuming the 90 days trading horizon Nan Ya is expected to generate 11.98 times less return on investment than Double Bond. In addition to that, Nan Ya is 2.82 times more volatile than Double Bond Chemical. It trades about 0.01 of its total potential returns per unit of risk. Double Bond Chemical is currently generating about 0.45 per unit of volatility. If you would invest 4,450 in Double Bond Chemical on November 5, 2024 and sell it today you would earn a total of 300.00 from holding Double Bond Chemical or generate 6.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. Double Bond Chemical
Performance |
| Timeline |
| Nan Ya Plastics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Double Bond Chemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Nan Ya and Double Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Double Bond
The main advantage of trading using opposite Nan Ya and Double Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Double Bond 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 Double Bond will offset losses from the drop in Double Bond's long position.The idea behind Nan Ya Plastics and Double Bond Chemical 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.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.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Commodity Directory Find actively traded commodities issued by global exchanges |