Correlation Between Tung Ho and Nan Pao
Can any of the company-specific risk be diversified away by investing in both Tung Ho and Nan Pao 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 Tung Ho and Nan Pao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tung Ho Steel and Nan Pao Resins, you can compare the effects of market volatilities on Tung Ho and Nan Pao 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 Tung Ho with a short position of Nan Pao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tung Ho and Nan Pao.
Diversification Opportunities for Tung Ho and Nan Pao
Very weak diversification
The 3 months correlation between Tung and Nan is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tung Ho Steel and Nan Pao Resins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Pao Resins and Tung Ho 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 Tung Ho Steel are associated (or correlated) with Nan Pao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Pao Resins has no effect on the direction of Tung Ho i.e., Tung Ho and Nan Pao go up and down completely randomly.
Pair Corralation between Tung Ho and Nan Pao
Assuming the 90 days trading horizon Tung Ho Steel is expected to under-perform the Nan Pao. But the stock apears to be less risky and, when comparing its historical volatility, Tung Ho Steel is 1.1 times less risky than Nan Pao. The stock trades about -0.24 of its potential returns per unit of risk. The Nan Pao Resins is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 32,100 in Nan Pao Resins on January 12, 2025 and sell it today you would lose (1,200) from holding Nan Pao Resins or give up 3.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Tung Ho Steel vs. Nan Pao Resins
Performance |
| Timeline |
| Tung Ho Steel |
| Nan Pao Resins |
Tung Ho and Nan Pao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tung Ho and Nan Pao
The main advantage of trading using opposite Tung Ho and Nan Pao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tung Ho position performs unexpectedly, Nan Pao 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 Pao will offset losses from the drop in Nan Pao's long position.| Tung Ho vs. China Steel Corp | Tung Ho vs. Feng Hsin Steel | Tung Ho vs. Ta Chen Stainless | Tung Ho vs. Chung Hung Steel |
| Nan Pao vs. Chia Hsin Cement | Nan Pao vs. Lucky Cement Co | Nan Pao vs. Hsing Ta Cement | Nan Pao vs. Universal Cement 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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