Correlation Between Nankang Rubber and Shih Kuen

Can any of the company-specific risk be diversified away by investing in both Nankang Rubber and Shih Kuen 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 Shih Kuen 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 Shih Kuen Plastics, you can compare the effects of market volatilities on Nankang Rubber and Shih Kuen 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 Shih Kuen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nankang Rubber and Shih Kuen.

Diversification Opportunities for Nankang Rubber and Shih Kuen

0.2

Correlation Coefficient

Nankang Rubber  Shih Kuen

Modest diversification

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

Pair Corralation between Nankang Rubber and Shih Kuen

Assuming the 90 days trading horizon Nankang Rubber is expected to generate 1.22 times less return on investment than Shih Kuen. But when comparing it to its historical volatility, Nankang Rubber Tire is 1.02 times less risky than Shih Kuen. It trades about 0.04 of its potential returns per unit of risk. Shih Kuen Plastics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,824  in Shih Kuen Plastics on September 30, 2024 and sell it today you would earn a total of  1,346  from holding Shih Kuen Plastics or generate 47.66% return on investment over 90 days.

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

Nankang Rubber Tire  vs.  Shih Kuen Plastics

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Shih Kuen Plastics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shih Kuen Plastics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Nankang Rubber and Shih Kuen

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

The idea behind Nankang Rubber Tire and Shih Kuen Plastics 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.