Correlation Between Nankang Rubber and Alar Pharmaceuticals

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

Diversification Opportunities for Nankang Rubber and Alar Pharmaceuticals

0.23

Correlation Coefficient

Nankang Rubber  Alar Pharmaceuticals

Modest diversification

The 3 months correlation between Nankang and Alar is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nankang Rubber Tire and Alar Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alar Pharmaceuticals 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 Alar Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alar Pharmaceuticals has no effect on the direction of Nankang Rubber i.e., Nankang Rubber and Alar Pharmaceuticals go up and down completely randomly.

Pair Corralation between Nankang Rubber and Alar Pharmaceuticals

Assuming the 90 days trading horizon Nankang Rubber Tire is expected to generate 0.8 times more return on investment than Alar Pharmaceuticals. However, Nankang Rubber Tire is 1.25 times less risky than Alar Pharmaceuticals. It trades about -0.03 of its potential returns per unit of risk. Alar Pharmaceuticals is currently generating about -0.12 per unit of risk. If you would invest  5,080  in Nankang Rubber Tire on September 16, 2024 and sell it today you would lose (290.00) from holding Nankang Rubber Tire or give up 5.71% of portfolio value over 90 days.

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

Nankang Rubber Tire  vs.  Alar Pharmaceuticals

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.

Alar Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alar Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Nankang Rubber and Alar Pharmaceuticals

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

The idea behind Nankang Rubber Tire and Alar Pharmaceuticals 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.