Correlation Between National Petroleum and Hsin Kao
Can any of the company-specific risk be diversified away by investing in both National Petroleum and Hsin Kao 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 National Petroleum and Hsin Kao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Petroleum Co and Hsin Kao Gas, you can compare the effects of market volatilities on National Petroleum and Hsin Kao 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 National Petroleum with a short position of Hsin Kao. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Petroleum and Hsin Kao.
Diversification Opportunities for National Petroleum and Hsin Kao
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and Hsin is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding National Petroleum Co and Hsin Kao Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Kao Gas and National Petroleum 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 National Petroleum Co are associated (or correlated) with Hsin Kao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Kao Gas has no effect on the direction of National Petroleum i.e., National Petroleum and Hsin Kao go up and down completely randomly.
Pair Corralation between National Petroleum and Hsin Kao
Assuming the 90 days trading horizon National Petroleum Co is expected to generate 1.25 times more return on investment than Hsin Kao. However, National Petroleum is 1.25 times more volatile than Hsin Kao Gas. It trades about 0.01 of its potential returns per unit of risk. Hsin Kao Gas is currently generating about -0.05 per unit of risk. If you would invest 6,560 in National Petroleum Co on September 5, 2024 and sell it today you would earn a total of 10.00 from holding National Petroleum Co or generate 0.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Petroleum Co vs. Hsin Kao Gas
Performance |
| Timeline |
| National Petroleum |
| Hsin Kao Gas |
National Petroleum and Hsin Kao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Petroleum and Hsin Kao
The main advantage of trading using opposite National Petroleum and Hsin Kao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Petroleum position performs unexpectedly, Hsin Kao 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 Hsin Kao will offset losses from the drop in Hsin Kao's long position.| National Petroleum vs. Tainan Spinning Co | National Petroleum vs. Chia Her Industrial | National Petroleum vs. WiseChip Semiconductor | National Petroleum vs. Novatek Microelectronics Corp |
| Hsin Kao vs. Great Taipei Gas | Hsin Kao vs. Shin Shin Natural | Hsin Kao vs. Shin Hai Gas | Hsin Kao vs. National Petroleum 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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