Correlation Between Asia Cement and Nan Ya

Can any of the company-specific risk be diversified away by investing in both Asia Cement 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 Asia Cement and Nan Ya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Asia Cement Corp and Nan Ya Plastics, you can compare the effects of market volatilities on Asia Cement 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 Asia Cement with a short position of Nan Ya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Cement and Nan Ya.

Diversification Opportunities for Asia Cement and Nan Ya

0.67

Correlation Coefficient

Asia Cement  Nan Ya

Poor diversification

The 3 months correlation between Asia and Nan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Asia Cement Corp 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 Asia Cement 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 Asia Cement Corp 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 Asia Cement i.e., Asia Cement and Nan Ya go up and down completely randomly.

Pair Corralation between Asia Cement and Nan Ya

Assuming the 90 days trading horizon Asia Cement Corp is expected to under-perform the Nan Ya. But the stock apears to be less risky and, when comparing its historical volatility, Asia Cement Corp is 1.56 times less risky than Nan Ya. The stock trades about -0.03 of its potential returns per unit of risk. The Nan Ya Plastics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,935  in Nan Ya Plastics on September 5, 2024 and sell it today you would earn a total of  30.00  from holding Nan Ya Plastics or generate 0.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Asia Cement Corp  vs.  Nan Ya Plastics

Asia Cement Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Cement Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Asia Cement is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Nan Ya Plastics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nan Ya Plastics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Nan Ya is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Asia Cement and Nan Ya

The main advantage of trading using opposite Asia Cement and Nan Ya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asia Cement 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 Asia Cement Corp 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.