Correlation Between Nan Ya and Te Chang
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Te Chang 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 Te Chang 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 Te Chang Construction, you can compare the effects of market volatilities on Nan Ya and Te Chang 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 Te Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Te Chang.
Diversification Opportunities for Nan Ya and Te Chang
Very good diversification
The 3 months correlation between Nan and 5511 is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Te Chang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Te Chang Construction 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 Te Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Te Chang Construction has no effect on the direction of Nan Ya i.e., Nan Ya and Te Chang go up and down completely randomly.
Pair Corralation between Nan Ya and Te Chang
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the Te Chang. But the stock apears to be less risky and, when comparing its historical volatility, Nan Ya Plastics is 1.35 times less risky than Te Chang. The stock trades about -0.09 of its potential returns per unit of risk. The Te Chang Construction is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,727 in Te Chang Construction on September 3, 2024 and sell it today you would earn a total of 3,453 from holding Te Chang Construction or generate 126.62% 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. Te Chang Construction
Performance |
| Timeline |
| Nan Ya Plastics |
| Te Chang Construction |
Nan Ya and Te Chang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Te Chang
The main advantage of trading using opposite Nan Ya and Te Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Te Chang 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 Te Chang will offset losses from the drop in Te Chang's long position.The idea behind Nan Ya Plastics and Te Chang Construction 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.| Te Chang vs. Ruentex Engineering Construction | Te Chang vs. Century Wind Power | Te Chang vs. BES Engineering Co | Te Chang vs. Da Cin Construction 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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