Correlation Between President Chain and Nan Liu
Can any of the company-specific risk be diversified away by investing in both President Chain and Nan Liu 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 President Chain and Nan Liu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between President Chain Store and Nan Liu Enterprise, you can compare the effects of market volatilities on President Chain and Nan Liu 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 President Chain with a short position of Nan Liu. Check out your portfolio center. Please also check ongoing floating volatility patterns of President Chain and Nan Liu.
Diversification Opportunities for President Chain and Nan Liu
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between President and Nan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding President Chain Store and Nan Liu Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Liu Enterprise and President Chain 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 President Chain Store are associated (or correlated) with Nan Liu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Liu Enterprise has no effect on the direction of President Chain i.e., President Chain and Nan Liu go up and down completely randomly.
Pair Corralation between President Chain and Nan Liu
Assuming the 90 days trading horizon President Chain Store is expected to generate 0.73 times more return on investment than Nan Liu. However, President Chain Store is 1.37 times less risky than Nan Liu. It trades about -0.05 of its potential returns per unit of risk. Nan Liu Enterprise is currently generating about -0.04 per unit of risk. If you would invest 28,350 in President Chain Store on December 4, 2024 and sell it today you would lose (1,850) from holding President Chain Store or give up 6.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
President Chain Store vs. Nan Liu Enterprise
Performance |
| Timeline |
| President Chain Store |
| Nan Liu Enterprise |
President Chain and Nan Liu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with President Chain and Nan Liu
The main advantage of trading using opposite President Chain and Nan Liu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if President Chain position performs unexpectedly, Nan Liu 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 Liu will offset losses from the drop in Nan Liu's long position.| President Chain vs. Uni President Enterprises Corp | President Chain vs. Formosa Plastics Corp | President Chain vs. Chunghwa Telecom Co | President Chain vs. Fubon Financial Holding |
| Nan Liu vs. Makalot Industrial Co | Nan Liu vs. President Chain Store | Nan Liu vs. Ruentex Development Co | Nan Liu vs. Eclat Textile 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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