Correlation Between Chia Yi and Nan Pao
Can any of the company-specific risk be diversified away by investing in both Chia Yi 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 Chia Yi and Nan Pao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chia Yi Steel and Nan Pao Resins, you can compare the effects of market volatilities on Chia Yi 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 Chia Yi with a short position of Nan Pao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia Yi and Nan Pao.
Diversification Opportunities for Chia Yi and Nan Pao
Average diversification
The 3 months correlation between Chia and Nan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Chia Yi 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 Chia Yi 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 Chia Yi 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 Chia Yi i.e., Chia Yi and Nan Pao go up and down completely randomly.
Pair Corralation between Chia Yi and Nan Pao
Assuming the 90 days trading horizon Chia Yi is expected to generate 1.02 times less return on investment than Nan Pao. In addition to that, Chia Yi is 1.99 times more volatile than Nan Pao Resins. It trades about 0.11 of its total potential returns per unit of risk. Nan Pao Resins is currently generating about 0.22 per unit of volatility. If you would invest 29,100 in Nan Pao Resins on September 2, 2024 and sell it today you would earn a total of 3,100 from holding Nan Pao Resins or generate 10.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chia Yi Steel vs. Nan Pao Resins
Performance |
| Timeline |
| Chia Yi Steel |
| Nan Pao Resins |
Chia Yi and Nan Pao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chia Yi and Nan Pao
The main advantage of trading using opposite Chia Yi and Nan Pao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chia Yi 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.| Chia Yi vs. Yang Ming Marine | Chia Yi vs. Wan Hai Lines | Chia Yi vs. Hsin Kuang Steel | Chia Yi vs. Evergreen Marine Corp |
| Nan Pao vs. China Construction Bank | Nan Pao vs. Te Chang Construction | Nan Pao vs. Hung Sheng Construction | Nan Pao vs. Bright Led Electronics |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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