Correlation Between Eternal Materials and Nankang Rubber
Can any of the company-specific risk be diversified away by investing in both Eternal Materials and Nankang Rubber 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 Eternal Materials and Nankang Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eternal Materials Co and Nankang Rubber Tire, you can compare the effects of market volatilities on Eternal Materials and Nankang Rubber 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 Eternal Materials with a short position of Nankang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eternal Materials and Nankang Rubber.
Diversification Opportunities for Eternal Materials and Nankang Rubber
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eternal and Nankang is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Materials Co and Nankang Rubber Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nankang Rubber Tire and Eternal Materials 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 Eternal Materials Co are associated (or correlated) with Nankang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nankang Rubber Tire has no effect on the direction of Eternal Materials i.e., Eternal Materials and Nankang Rubber go up and down completely randomly.
Pair Corralation between Eternal Materials and Nankang Rubber
Assuming the 90 days trading horizon Eternal Materials Co is expected to under-perform the Nankang Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Eternal Materials Co is 1.35 times less risky than Nankang Rubber. The stock trades about -0.01 of its potential returns per unit of risk. The Nankang Rubber Tire is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,680 in Nankang Rubber Tire on November 19, 2024 and sell it today you would earn a total of 890.00 from holding Nankang Rubber Tire or generate 24.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Eternal Materials Co vs. Nankang Rubber Tire
Performance |
| Timeline |
| Eternal Materials |
| Nankang Rubber Tire |
Eternal Materials and Nankang Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eternal Materials and Nankang Rubber
The main advantage of trading using opposite Eternal Materials and Nankang Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eternal Materials position performs unexpectedly, Nankang Rubber 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 Nankang Rubber will offset losses from the drop in Nankang Rubber's long position.| Eternal Materials vs. Taiwan Fertilizer Co | Eternal Materials vs. Nan Ya Plastics | Eternal Materials vs. Formosa Chemicals Fibre | Eternal Materials vs. Far Eastern New |
| Nankang Rubber vs. Yulon Motor Co | Nankang Rubber vs. Federal Corp | Nankang Rubber vs. Kenda Rubber Industrial | Nankang Rubber vs. Taiwan Glass Ind |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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