Correlation Between Te Chang and Nan Pao
Can any of the company-specific risk be diversified away by investing in both Te Chang and Nan Pao 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 Te Chang and Nan Pao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Te Chang Construction and Nan Pao Resins, you can compare the effects of market volatilities on Te Chang and Nan Pao 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 Te Chang with a short position of Nan Pao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Te Chang and Nan Pao.
Diversification Opportunities for Te Chang and Nan Pao
Good diversification
The 3 months correlation between 5511 and Nan is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Te Chang Construction and Nan Pao Resins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Pao Resins and Te Chang 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 Te Chang Construction are associated (or correlated) with Nan Pao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Pao Resins has no effect on the direction of Te Chang i.e., Te Chang and Nan Pao go up and down completely randomly.
Pair Corralation between Te Chang and Nan Pao
Assuming the 90 days trading horizon Te Chang Construction is expected to under-perform the Nan Pao. But the stock apears to be less risky and, when comparing its historical volatility, Te Chang Construction is 2.55 times less risky than Nan Pao. The stock trades about -0.1 of its potential returns per unit of risk. The Nan Pao Resins is currently generating about 0.22 of returns per unit of risk over similar time horizon. 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Te Chang Construction vs. Nan Pao Resins
Performance |
| Timeline |
| Te Chang Construction |
| Nan Pao Resins |
Te Chang and Nan Pao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Te Chang and Nan Pao
The main advantage of trading using opposite Te Chang and Nan Pao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Te Chang position performs unexpectedly, Nan Pao 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 Pao will offset losses from the drop in Nan Pao's long position.| Te Chang vs. Grand Ocean Retail | Te Chang vs. Simplo Technology Co | Te Chang vs. Jia Jie Biomedical | Te Chang vs. Microtips Technology |
| Nan Pao vs. China Construction Bank | Nan Pao vs. Te Chang Construction | Nan Pao vs. Hung Sheng Construction | Nan Pao vs. Bright Led Electronics |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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