Correlation Between Nien Hsing and Kaulin Mfg
Can any of the company-specific risk be diversified away by investing in both Nien Hsing and Kaulin Mfg 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 Nien Hsing and Kaulin Mfg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nien Hsing Textile and Kaulin Mfg, you can compare the effects of market volatilities on Nien Hsing and Kaulin Mfg 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 Nien Hsing with a short position of Kaulin Mfg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nien Hsing and Kaulin Mfg.
Diversification Opportunities for Nien Hsing and Kaulin Mfg
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nien and Kaulin is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nien Hsing Textile and Kaulin Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaulin Mfg and Nien Hsing 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 Nien Hsing Textile are associated (or correlated) with Kaulin Mfg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaulin Mfg has no effect on the direction of Nien Hsing i.e., Nien Hsing and Kaulin Mfg go up and down completely randomly.
Pair Corralation between Nien Hsing and Kaulin Mfg
Assuming the 90 days trading horizon Nien Hsing is expected to generate 3.62 times less return on investment than Kaulin Mfg. But when comparing it to its historical volatility, Nien Hsing Textile is 3.74 times less risky than Kaulin Mfg. It trades about 0.08 of its potential returns per unit of risk. Kaulin Mfg is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,420 in Kaulin Mfg on August 25, 2024 and sell it today you would earn a total of 160.00 from holding Kaulin Mfg or generate 11.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nien Hsing Textile vs. Kaulin Mfg
Performance |
| Timeline |
| Nien Hsing Textile |
| Kaulin Mfg |
Nien Hsing and Kaulin Mfg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nien Hsing and Kaulin Mfg
The main advantage of trading using opposite Nien Hsing and Kaulin Mfg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nien Hsing position performs unexpectedly, Kaulin Mfg 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 Kaulin Mfg will offset losses from the drop in Kaulin Mfg's long position.| Nien Hsing vs. Taiwan Semiconductor Manufacturing | Nien Hsing vs. Hon Hai Precision | Nien Hsing vs. MediaTek | Nien Hsing vs. Chunghwa Telecom Co |
| Kaulin Mfg vs. Tainan Enterprises Co | Kaulin Mfg vs. Nien Hsing Textile | Kaulin Mfg vs. De Licacy Industrial | Kaulin Mfg vs. Kwong Fong Industries |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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