Correlation Between Nankang Rubber and BenQ Materials

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

Diversification Opportunities for Nankang Rubber and BenQ Materials

-0.3

Correlation Coefficient

Nankang Rubber  BenQ Materials

Very good diversification

The 3 months correlation between Nankang and BenQ is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nankang Rubber Tire and BenQ Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BenQ Materials Corp 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 BenQ Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BenQ Materials Corp has no effect on the direction of Nankang Rubber i.e., Nankang Rubber and BenQ Materials go up and down completely randomly.

Pair Corralation between Nankang Rubber and BenQ Materials

Assuming the 90 days trading horizon Nankang Rubber Tire is expected to generate 1.34 times more return on investment than BenQ Materials. However, Nankang Rubber is 1.34 times more volatile than BenQ Materials Corp. It trades about 0.05 of its potential returns per unit of risk. BenQ Materials Corp is currently generating about -0.01 per unit of risk. If you would invest  3,855  in Nankang Rubber Tire on September 12, 2024 and sell it today you would earn a total of  1,085  from holding Nankang Rubber Tire or generate 28.15% 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.  BenQ Materials Corp

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.

BenQ Materials Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BenQ Materials Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, BenQ Materials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nankang Rubber and BenQ Materials

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

The idea behind Nankang Rubber Tire and BenQ Materials Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.