Correlation Between Nan Ya and Ingentec
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Ingentec 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 Ingentec 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 Ingentec, you can compare the effects of market volatilities on Nan Ya and Ingentec 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 Ingentec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Ingentec.
Diversification Opportunities for Nan Ya and Ingentec
Very poor diversification
The 3 months correlation between Nan and Ingentec is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Ingentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingentec 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 Ingentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingentec has no effect on the direction of Nan Ya i.e., Nan Ya and Ingentec go up and down completely randomly.
Pair Corralation between Nan Ya and Ingentec
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the Ingentec. But the stock apears to be less risky and, when comparing its historical volatility, Nan Ya Plastics is 1.15 times less risky than Ingentec. The stock trades about -0.13 of its potential returns per unit of risk. The Ingentec is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 22,950 in Ingentec on November 2, 2024 and sell it today you would lose (4,850) from holding Ingentec or give up 21.13% 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. Ingentec
Performance |
| Timeline |
| Nan Ya Plastics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Ingentec |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Nan Ya and Ingentec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Ingentec
The main advantage of trading using opposite Nan Ya and Ingentec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Ingentec 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 Ingentec will offset losses from the drop in Ingentec's long position.The idea behind Nan Ya Plastics and Ingentec 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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