Correlation Between Nan Ya and Taiwan Cement

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

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

Diversification Opportunities for Nan Ya and Taiwan Cement

0.82

Correlation Coefficient

Nan Ya  Taiwan Cement

Very poor diversification

The 3 months correlation between Nan and Taiwan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Taiwan Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cement Corp and Nan Ya 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 Ya Plastics are associated (or correlated) with Taiwan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cement Corp has no effect on the direction of Nan Ya i.e., Nan Ya and Taiwan Cement go up and down completely randomly.

Pair Corralation between Nan Ya and Taiwan Cement

Assuming the 90 days trading horizon Nan Ya Plastics is expected to generate 2.05 times more return on investment than Taiwan Cement. However, Nan Ya is 2.05 times more volatile than Taiwan Cement Corp. It trades about 0.04 of its potential returns per unit of risk. Taiwan Cement Corp is currently generating about 0.06 per unit of risk. If you would invest  3,100  in Nan Ya Plastics on December 27, 2024 and sell it today you would earn a total of  120.00  from holding Nan Ya Plastics or generate 3.87% return on investment over 90 days.

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

Nan Ya Plastics  vs.  Taiwan Cement Corp

Nan Ya Plastics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nan Ya Plastics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nan Ya may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Taiwan Cement Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Cement Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taiwan Cement 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 Nan Ya and Taiwan Cement

The main advantage of trading using opposite Nan Ya and Taiwan Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Taiwan Cement 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 Taiwan Cement will offset losses from the drop in Taiwan Cement's long position.

The idea behind Nan Ya Plastics and Taiwan Cement Corp 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.