Correlation Between Nankang Rubber and Microelectronics

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

By analyzing existing cross correlation between Nankang Rubber Tire and Microelectronics Technology, you can compare the effects of market volatilities on Nankang Rubber and Microelectronics 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 Nankang Rubber with a short position of Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nankang Rubber and Microelectronics.

Diversification Opportunities for Nankang Rubber and Microelectronics

-0.2

Correlation Coefficient

Nankang Rubber  Microelectronics

Good diversification

The 3 months correlation between Nankang and Microelectronics is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nankang Rubber Tire and Microelectronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microelectronics Tec and Nankang Rubber 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 Nankang Rubber Tire are associated (or correlated) with Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microelectronics Tec has no effect on the direction of Nankang Rubber i.e., Nankang Rubber and Microelectronics go up and down completely randomly.

Pair Corralation between Nankang Rubber and Microelectronics

Assuming the 90 days trading horizon Nankang Rubber is expected to generate 30.92 times less return on investment than Microelectronics. But when comparing it to its historical volatility, Nankang Rubber Tire is 1.31 times less risky than Microelectronics. It trades about 0.0 of its potential returns per unit of risk. Microelectronics Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,790  in Microelectronics Technology on September 12, 2024 and sell it today you would earn a total of  215.00  from holding Microelectronics Technology or generate 7.71% return on investment over 90 days.

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

Nankang Rubber Tire  vs.  Microelectronics Technology

Nankang Rubber Tire

Risk-Adjusted Performance

0 of 100

Very Weak

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

Microelectronics Tec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microelectronics Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Microelectronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nankang Rubber and Microelectronics

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

The idea behind Nankang Rubber Tire and Microelectronics Technology 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.