Correlation Between Lealea Enterprise and Nan Pao

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

By analyzing existing cross correlation between Lealea Enterprise Co and Nan Pao Resins, you can compare the effects of market volatilities on Lealea Enterprise and Nan Pao 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 Lealea Enterprise with a short position of Nan Pao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lealea Enterprise and Nan Pao.

Diversification Opportunities for Lealea Enterprise and Nan Pao

0.28

Correlation Coefficient

Lealea Enterprise  Nan Pao

Modest diversification

The 3 months correlation between Lealea and Nan is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lealea Enterprise Co and Nan Pao Resins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Pao Resins and Lealea Enterprise 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 Lealea Enterprise Co are associated (or correlated) with Nan Pao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Pao Resins has no effect on the direction of Lealea Enterprise i.e., Lealea Enterprise and Nan Pao go up and down completely randomly.

Pair Corralation between Lealea Enterprise and Nan Pao

Assuming the 90 days trading horizon Lealea Enterprise Co is expected to under-perform the Nan Pao. But the stock apears to be less risky and, when comparing its historical volatility, Lealea Enterprise Co is 1.73 times less risky than Nan Pao. The stock trades about -0.01 of its potential returns per unit of risk. The Nan Pao Resins is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  29,450  in Nan Pao Resins on September 17, 2024 and sell it today you would earn a total of  2,050  from holding Nan Pao Resins or generate 6.96% return on investment over 90 days.

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

Lealea Enterprise Co  vs.  Nan Pao Resins

Lealea Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nan Pao Resins

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nan Pao Resins are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nan Pao may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lealea Enterprise and Nan Pao

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

The idea behind Lealea Enterprise Co and Nan Pao Resins 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.