Correlation Between Nan Pao and TYC Brother
Can any of the company-specific risk be diversified away by investing in both Nan Pao and TYC Brother 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 TYC Brother 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 TYC Brother Industrial, you can compare the effects of market volatilities on Nan Pao and TYC Brother 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 TYC Brother. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Pao and TYC Brother.
Diversification Opportunities for Nan Pao and TYC Brother
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nan and TYC is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Nan Pao Resins and TYC Brother Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TYC Brother Industrial 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 TYC Brother. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TYC Brother Industrial has no effect on the direction of Nan Pao i.e., Nan Pao and TYC Brother go up and down completely randomly.
Pair Corralation between Nan Pao and TYC Brother
Assuming the 90 days trading horizon Nan Pao Resins is expected to generate 1.4 times more return on investment than TYC Brother. However, Nan Pao is 1.4 times more volatile than TYC Brother Industrial. It trades about 0.22 of its potential returns per unit of risk. TYC Brother Industrial is currently generating about 0.21 per unit of risk. If you would invest 29,100 in Nan Pao Resins on September 2, 2024 and sell it today you would earn a total of 3,100 from holding Nan Pao Resins or generate 10.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Pao Resins vs. TYC Brother Industrial
Performance |
| Timeline |
| Nan Pao Resins |
| TYC Brother Industrial |
Nan Pao and TYC Brother Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Pao and TYC Brother
The main advantage of trading using opposite Nan Pao and TYC Brother positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Pao position performs unexpectedly, TYC Brother 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 TYC Brother will offset losses from the drop in TYC Brother's long position.| Nan Pao vs. China Construction Bank | Nan Pao vs. Te Chang Construction | Nan Pao vs. Hung Sheng Construction | Nan Pao vs. Bright Led Electronics |
| TYC Brother vs. Tong Yang Industry | TYC Brother vs. Ta Yih Industrial | TYC Brother vs. Basso Industry Corp | TYC Brother vs. China Motor Corp |
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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