Correlation Between Universal Cement and Nan Ya
Can any of the company-specific risk be diversified away by investing in both Universal 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 Universal 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 Universal Cement Corp and Nan Ya Plastics, you can compare the effects of market volatilities on Universal 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 Universal Cement with a short position of Nan Ya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Cement and Nan Ya.
Diversification Opportunities for Universal Cement and Nan Ya
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Universal and Nan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Universal 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 Universal 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 Universal 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 Universal Cement i.e., Universal Cement and Nan Ya go up and down completely randomly.
Pair Corralation between Universal Cement and Nan Ya
Assuming the 90 days trading horizon Universal Cement Corp is expected to generate 0.48 times more return on investment than Nan Ya. However, Universal Cement Corp is 2.06 times less risky than Nan Ya. It trades about -0.03 of its potential returns per unit of risk. Nan Ya Plastics is currently generating about -0.2 per unit of risk. If you would invest 2,920 in Universal Cement Corp on November 15, 2024 and sell it today you would lose (70.00) from holding Universal Cement Corp or give up 2.4% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Universal Cement Corp vs. Nan Ya Plastics
Performance |
Timeline |
Universal Cement Corp |
Nan Ya Plastics |
Universal Cement and Nan Ya Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Universal Cement and Nan Ya
The main advantage of trading using opposite Universal Cement and Nan Ya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal 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.Universal Cement vs. Chia Hsin Cement | ||
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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