Correlation Between Taiwan Fertilizer and Nan Ya
Can any of the company-specific risk be diversified away by investing in both Taiwan Fertilizer and Nan Ya 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 Taiwan Fertilizer and Nan Ya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Fertilizer Co and Nan Ya Plastics, you can compare the effects of market volatilities on Taiwan Fertilizer and Nan Ya 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 Taiwan Fertilizer with a short position of Nan Ya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Fertilizer and Nan Ya.
Diversification Opportunities for Taiwan Fertilizer and Nan Ya
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Nan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Fertilizer Co and Nan Ya Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Ya Plastics and Taiwan Fertilizer 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 Taiwan Fertilizer Co are associated (or correlated) with Nan Ya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Ya Plastics has no effect on the direction of Taiwan Fertilizer i.e., Taiwan Fertilizer and Nan Ya go up and down completely randomly.
Pair Corralation between Taiwan Fertilizer and Nan Ya
Assuming the 90 days trading horizon Taiwan Fertilizer Co is expected to generate 0.76 times more return on investment than Nan Ya. However, Taiwan Fertilizer Co is 1.32 times less risky than Nan Ya. It trades about -0.01 of its potential returns per unit of risk. Nan Ya Plastics is currently generating about -0.11 per unit of risk. If you would invest 6,080 in Taiwan Fertilizer Co on August 30, 2024 and sell it today you would lose (430.00) from holding Taiwan Fertilizer Co or give up 7.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Fertilizer Co vs. Nan Ya Plastics
Performance |
| Timeline |
| Taiwan Fertilizer |
| Nan Ya Plastics |
Taiwan Fertilizer and Nan Ya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Fertilizer and Nan Ya
The main advantage of trading using opposite Taiwan Fertilizer and Nan Ya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Fertilizer position performs unexpectedly, Nan Ya 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 Nan Ya will offset losses from the drop in Nan Ya's long position.| Taiwan Fertilizer vs. Taiwan Cement Corp | Taiwan Fertilizer vs. Far Eastern New | Taiwan Fertilizer vs. Asia Cement Corp | Taiwan Fertilizer vs. Formosa Plastics Corp |
| Nan Ya vs. Formosa Plastics Corp | Nan Ya vs. Formosa Chemicals Fibre | Nan Ya vs. China Steel Corp | Nan Ya vs. Formosa Petrochemical Corp |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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