Correlation Between Nan Ya and Taiwan Speciality
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Taiwan Speciality 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 Taiwan Speciality 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 Taiwan Speciality Chemicals, you can compare the effects of market volatilities on Nan Ya and Taiwan Speciality 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 Taiwan Speciality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Taiwan Speciality.
Diversification Opportunities for Nan Ya and Taiwan Speciality
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nan and Taiwan is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Taiwan Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Speciality 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 Taiwan Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Speciality has no effect on the direction of Nan Ya i.e., Nan Ya and Taiwan Speciality go up and down completely randomly.
Pair Corralation between Nan Ya and Taiwan Speciality
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the Taiwan Speciality. But the stock apears to be less risky and, when comparing its historical volatility, Nan Ya Plastics is 1.32 times less risky than Taiwan Speciality. The stock trades about -0.27 of its potential returns per unit of risk. The Taiwan Speciality Chemicals is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 17,300 in Taiwan Speciality Chemicals on November 7, 2024 and sell it today you would earn a total of 7,150 from holding Taiwan Speciality Chemicals or generate 41.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. Taiwan Speciality Chemicals
Performance |
| Timeline |
| Nan Ya Plastics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Taiwan Speciality |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Nan Ya and Taiwan Speciality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Taiwan Speciality
The main advantage of trading using opposite Nan Ya and Taiwan Speciality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Taiwan Speciality 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 Taiwan Speciality will offset losses from the drop in Taiwan Speciality's long position.The idea behind Nan Ya Plastics and Taiwan Speciality Chemicals 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |