Correlation Between Nankang Rubber and Kunyue Development
Can any of the company-specific risk be diversified away by investing in both Nankang Rubber and Kunyue Development 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 Nankang Rubber and Kunyue Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nankang Rubber Tire and Kunyue Development Co, you can compare the effects of market volatilities on Nankang Rubber and Kunyue Development 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 Nankang Rubber with a short position of Kunyue Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nankang Rubber and Kunyue Development.
Diversification Opportunities for Nankang Rubber and Kunyue Development
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nankang and Kunyue is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Nankang Rubber Tire and Kunyue Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunyue Development and Nankang Rubber 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 Nankang Rubber Tire are associated (or correlated) with Kunyue Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunyue Development has no effect on the direction of Nankang Rubber i.e., Nankang Rubber and Kunyue Development go up and down completely randomly.
Pair Corralation between Nankang Rubber and Kunyue Development
Assuming the 90 days trading horizon Nankang Rubber is expected to generate 5.4 times less return on investment than Kunyue Development. But when comparing it to its historical volatility, Nankang Rubber Tire is 1.17 times less risky than Kunyue Development. It trades about 0.03 of its potential returns per unit of risk. Kunyue Development Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,800 in Kunyue Development Co on August 24, 2024 and sell it today you would earn a total of 230.00 from holding Kunyue Development Co or generate 6.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nankang Rubber Tire vs. Kunyue Development Co
Performance |
| Timeline |
| Nankang Rubber Tire |
| Kunyue Development |
Nankang Rubber and Kunyue Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nankang Rubber and Kunyue Development
The main advantage of trading using opposite Nankang Rubber and Kunyue Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nankang Rubber position performs unexpectedly, Kunyue Development 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 Kunyue Development will offset losses from the drop in Kunyue Development's long position.| Nankang Rubber vs. Taiwan Semiconductor Manufacturing | Nankang Rubber vs. Hon Hai Precision | Nankang Rubber vs. MediaTek | Nankang Rubber vs. Chunghwa Telecom Co |
| Kunyue Development vs. Tradetool Auto Co | Kunyue Development vs. Simplo Technology Co | Kunyue Development vs. Voltronic Power Technology | Kunyue Development vs. Microelectronics Technology |
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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