Correlation Between Nan Pao and Chung Hsin
Can any of the company-specific risk be diversified away by investing in both Nan Pao and Chung Hsin 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 Nan Pao and Chung Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nan Pao Resins and Chung Hsin Electric Machinery, you can compare the effects of market volatilities on Nan Pao and Chung Hsin 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 Nan Pao with a short position of Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Pao and Chung Hsin.
Diversification Opportunities for Nan Pao and Chung Hsin
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Nan and Chung is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Nan Pao Resins and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric and Nan Pao 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 Nan Pao Resins are associated (or correlated) with Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of Nan Pao i.e., Nan Pao and Chung Hsin go up and down completely randomly.
Pair Corralation between Nan Pao and Chung Hsin
Assuming the 90 days trading horizon Nan Pao is expected to generate 1.15 times less return on investment than Chung Hsin. But when comparing it to its historical volatility, Nan Pao Resins is 1.17 times less risky than Chung Hsin. It trades about 0.06 of its potential returns per unit of risk. Chung Hsin Electric Machinery is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 10,350 in Chung Hsin Electric Machinery on September 3, 2024 and sell it today you would earn a total of 5,400 from holding Chung Hsin Electric Machinery or generate 52.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Pao Resins vs. Chung Hsin Electric Machinery
Performance |
| Timeline |
| Nan Pao Resins |
| Chung Hsin Electric |
Nan Pao and Chung Hsin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Pao and Chung Hsin
The main advantage of trading using opposite Nan Pao and Chung Hsin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Pao position performs unexpectedly, Chung Hsin 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 Chung Hsin will offset losses from the drop in Chung Hsin's long position.| Nan Pao vs. Hunya Foods Co | Nan Pao vs. Cameo Communications | Nan Pao vs. BenQ Materials Corp | Nan Pao vs. Advanced Echem Materials |
| Chung Hsin vs. Universal Microelectronics Co | Chung Hsin vs. AVerMedia Technologies | Chung Hsin vs. Symtek Automation Asia | Chung Hsin vs. WiseChip Semiconductor |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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