Correlation Between Nankang Rubber and Tacheng Real

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

Diversification Opportunities for Nankang Rubber and Tacheng Real

0.04

Correlation Coefficient

Nankang Rubber  Tacheng Real

Significant diversification

The 3 months correlation between Nankang and Tacheng is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nankang Rubber Tire and Tacheng Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tacheng Real Estate 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 Tacheng Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tacheng Real Estate has no effect on the direction of Nankang Rubber i.e., Nankang Rubber and Tacheng Real go up and down completely randomly.

Pair Corralation between Nankang Rubber and Tacheng Real

Assuming the 90 days trading horizon Nankang Rubber Tire is expected to under-perform the Tacheng Real. In addition to that, Nankang Rubber is 1.44 times more volatile than Tacheng Real Estate. It trades about -0.38 of its total potential returns per unit of risk. Tacheng Real Estate is currently generating about -0.13 per unit of volatility. If you would invest  4,205  in Tacheng Real Estate on October 4, 2024 and sell it today you would lose (100.00) from holding Tacheng Real Estate or give up 2.38% of portfolio value over 90 days.

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

Nankang Rubber Tire  vs.  Tacheng Real Estate

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.

Tacheng Real Estate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tacheng Real Estate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tacheng Real may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nankang Rubber and Tacheng Real

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

The idea behind Nankang Rubber Tire and Tacheng Real Estate 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.