Correlation Between Nankang Rubber and Cheng Fwa
Can any of the company-specific risk be diversified away by investing in both Nankang Rubber and Cheng Fwa 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 Cheng Fwa 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 Cheng Fwa Industrial, you can compare the effects of market volatilities on Nankang Rubber and Cheng Fwa 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 Cheng Fwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nankang Rubber and Cheng Fwa.
Diversification Opportunities for Nankang Rubber and Cheng Fwa
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nankang and Cheng is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Nankang Rubber Tire and Cheng Fwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Fwa Industrial 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 Cheng Fwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Fwa Industrial has no effect on the direction of Nankang Rubber i.e., Nankang Rubber and Cheng Fwa go up and down completely randomly.
Pair Corralation between Nankang Rubber and Cheng Fwa
Assuming the 90 days trading horizon Nankang Rubber is expected to generate 2.6 times less return on investment than Cheng Fwa. But when comparing it to its historical volatility, Nankang Rubber Tire is 1.97 times less risky than Cheng Fwa. It trades about 0.05 of its potential returns per unit of risk. Cheng Fwa Industrial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,407 in Cheng Fwa Industrial on September 3, 2024 and sell it today you would earn a total of 1,873 from holding Cheng Fwa Industrial or generate 133.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nankang Rubber Tire vs. Cheng Fwa Industrial
Performance |
| Timeline |
| Nankang Rubber Tire |
| Cheng Fwa Industrial |
Nankang Rubber and Cheng Fwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nankang Rubber and Cheng Fwa
The main advantage of trading using opposite Nankang Rubber and Cheng Fwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nankang Rubber position performs unexpectedly, Cheng Fwa 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 Cheng Fwa will offset losses from the drop in Cheng Fwa's long position.| Nankang Rubber vs. Tainan Spinning Co | Nankang Rubber vs. Chia Her Industrial | Nankang Rubber vs. WiseChip Semiconductor | Nankang Rubber vs. Novatek Microelectronics Corp |
| Cheng Fwa vs. Nankang Rubber Tire | Cheng Fwa vs. Newretail Co | Cheng Fwa vs. Cheng Mei Materials | Cheng Fwa vs. Tradetool Auto Co |
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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