Correlation Between Mechema Chemicals and Nan Ya
Can any of the company-specific risk be diversified away by investing in both Mechema Chemicals and Nan Ya 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 Mechema Chemicals and Nan Ya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mechema Chemicals Int and Nan Ya Plastics, you can compare the effects of market volatilities on Mechema Chemicals and Nan Ya 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 Mechema Chemicals with a short position of Nan Ya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mechema Chemicals and Nan Ya.
Diversification Opportunities for Mechema Chemicals and Nan Ya
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mechema and Nan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Mechema Chemicals Int and Nan Ya Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Ya Plastics and Mechema Chemicals 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 Mechema Chemicals Int are associated (or correlated) with Nan Ya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Ya Plastics has no effect on the direction of Mechema Chemicals i.e., Mechema Chemicals and Nan Ya go up and down completely randomly.
Pair Corralation between Mechema Chemicals and Nan Ya
Assuming the 90 days trading horizon Mechema Chemicals Int is expected to under-perform the Nan Ya. But the stock apears to be less risky and, when comparing its historical volatility, Mechema Chemicals Int is 1.98 times less risky than Nan Ya. The stock trades about -0.33 of its potential returns per unit of risk. The Nan Ya Plastics is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 3,125 in Nan Ya Plastics on November 7, 2024 and sell it today you would lose (80.00) from holding Nan Ya Plastics or give up 2.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mechema Chemicals Int vs. Nan Ya Plastics
Performance |
| Timeline |
| Mechema Chemicals Int |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Nan Ya Plastics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Mechema Chemicals and Nan Ya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mechema Chemicals and Nan Ya
The main advantage of trading using opposite Mechema Chemicals and Nan Ya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mechema Chemicals position performs unexpectedly, Nan Ya 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 Ya will offset losses from the drop in Nan Ya's long position.The idea behind Mechema Chemicals Int and Nan Ya Plastics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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