Correlation Between Nan Ya and Taiwan Hon
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Taiwan Hon 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 Hon 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 Hon Chuan, you can compare the effects of market volatilities on Nan Ya and Taiwan Hon 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 Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Taiwan Hon.
Diversification Opportunities for Nan Ya and Taiwan Hon
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nan and Taiwan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Taiwan Hon Chuan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hon Chuan 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 Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hon Chuan has no effect on the direction of Nan Ya i.e., Nan Ya and Taiwan Hon go up and down completely randomly.
Pair Corralation between Nan Ya and Taiwan Hon
Assuming the 90 days trading horizon Nan Ya Plastics is expected to under-perform the Taiwan Hon. But the stock apears to be less risky and, when comparing its historical volatility, Nan Ya Plastics is 1.11 times less risky than Taiwan Hon. The stock trades about -0.1 of its potential returns per unit of risk. The Taiwan Hon Chuan is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 8,690 in Taiwan Hon Chuan on September 13, 2024 and sell it today you would earn a total of 5,860 from holding Taiwan Hon Chuan or generate 67.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. Taiwan Hon Chuan
Performance |
| Timeline |
| Nan Ya Plastics |
| Taiwan Hon Chuan |
Nan Ya and Taiwan Hon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Taiwan Hon
The main advantage of trading using opposite Nan Ya and Taiwan Hon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Taiwan Hon 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 Hon will offset losses from the drop in Taiwan Hon'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 |
| Taiwan Hon vs. China Mobile | Taiwan Hon vs. TWOWAY Communications | Taiwan Hon vs. X Legend Entertainment Co | Taiwan Hon vs. Gamania Digital Entertainment |
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 Stocks Directory module to find actively traded stocks across global markets.
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