Correlation Between Nankang Rubber and Yem Chio

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

Diversification Opportunities for Nankang Rubber and Yem Chio

0.36

Correlation Coefficient

Nankang Rubber  Yem Chio

Weak diversification

The 3 months correlation between Nankang and Yem is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nankang Rubber Tire and Yem Chio Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yem Chio 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 Yem Chio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yem Chio has no effect on the direction of Nankang Rubber i.e., Nankang Rubber and Yem Chio go up and down completely randomly.

Pair Corralation between Nankang Rubber and Yem Chio

Assuming the 90 days trading horizon Nankang Rubber Tire is expected to generate 1.21 times more return on investment than Yem Chio. However, Nankang Rubber is 1.21 times more volatile than Yem Chio Co. It trades about 0.04 of its potential returns per unit of risk. Yem Chio Co is currently generating about 0.03 per unit of risk. If you would invest  3,345  in Nankang Rubber Tire on September 30, 2024 and sell it today you would earn a total of  1,210  from holding Nankang Rubber Tire or generate 36.17% 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.  Yem Chio Co

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.

Yem Chio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yem Chio Co 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 Yem Chio

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

The idea behind Nankang Rubber Tire and Yem Chio Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.