Correlation Between Chung Hsin and Nan Pao

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

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

Diversification Opportunities for Chung Hsin and Nan Pao

-0.11

Correlation Coefficient

Chung Hsin  Nan Pao

Good diversification

The 3 months correlation between Chung and Nan is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery 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 Chung Hsin 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 Chung Hsin Electric Machinery 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 Chung Hsin i.e., Chung Hsin and Nan Pao go up and down completely randomly.

Pair Corralation between Chung Hsin and Nan Pao

Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the Nan Pao. In addition to that, Chung Hsin is 1.11 times more volatile than Nan Pao Resins. It trades about -0.03 of its total potential returns per unit of risk. Nan Pao Resins is currently generating about 0.2 per unit of volatility. If you would invest  30,800  in Nan Pao Resins on December 21, 2024 and sell it today you would earn a total of  5,550  from holding Nan Pao Resins or generate 18.02% return on investment over 90 days.

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

Chung Hsin Electric Machinery  vs.  Nan Pao Resins

Chung Hsin Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chung Hsin Electric Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Hsin 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nan Pao Resins are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nan Pao showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chung Hsin and Nan Pao

The main advantage of trading using opposite Chung Hsin and Nan Pao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hsin 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 Chung Hsin Electric Machinery 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.

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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.