Correlation Between Nan Ya and Sea Sonic

Can any of the company-specific risk be diversified away by investing in both Nan Ya and Sea Sonic 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 Sea Sonic 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 Sea Sonic Electronics, you can compare the effects of market volatilities on Nan Ya and Sea Sonic 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 Sea Sonic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Sea Sonic.

Diversification Opportunities for Nan Ya and Sea Sonic

0.13

Correlation Coefficient

Nan Ya  Sea Sonic

Average diversification

The 3 months correlation between Nan and Sea is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Sea Sonic Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Sonic Electronics 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 Sea Sonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Sonic Electronics has no effect on the direction of Nan Ya i.e., Nan Ya and Sea Sonic go up and down completely randomly.

Pair Corralation between Nan Ya and Sea Sonic

Assuming the 90 days trading horizon Nan Ya is expected to generate 1.22 times less return on investment than Sea Sonic. But when comparing it to its historical volatility, Nan Ya Plastics is 1.03 times less risky than Sea Sonic. It trades about 0.09 of its potential returns per unit of risk. Sea Sonic Electronics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,000  in Sea Sonic Electronics on December 21, 2024 and sell it today you would earn a total of  980.00  from holding Sea Sonic Electronics or generate 14.0% return on investment over 90 days.

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

Nan Ya Plastics  vs.  Sea Sonic Electronics

Nan Ya Plastics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nan Ya Plastics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nan Ya showed solid returns over the last few months and may actually be approaching a breakup point.

Sea Sonic Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Sonic Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sea Sonic showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nan Ya and Sea Sonic

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

The idea behind Nan Ya Plastics and Sea Sonic Electronics 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.