Correlation Between Sanyang and Nankang Rubber

Can any of the company-specific risk be diversified away by investing in both Sanyang and Nankang Rubber 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 Sanyang and Nankang Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sanyang Motor Co and Nankang Rubber Tire, you can compare the effects of market volatilities on Sanyang and Nankang Rubber 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 Sanyang with a short position of Nankang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanyang and Nankang Rubber.

Diversification Opportunities for Sanyang and Nankang Rubber

0.45

Correlation Coefficient

Sanyang  Nankang Rubber

Very weak diversification

The 3 months correlation between Sanyang and Nankang is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sanyang Motor Co and Nankang Rubber Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nankang Rubber Tire and Sanyang 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 Sanyang Motor Co are associated (or correlated) with Nankang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nankang Rubber Tire has no effect on the direction of Sanyang i.e., Sanyang and Nankang Rubber go up and down completely randomly.

Pair Corralation between Sanyang and Nankang Rubber

Assuming the 90 days trading horizon Sanyang Motor Co is expected to under-perform the Nankang Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Sanyang Motor Co is 1.17 times less risky than Nankang Rubber. The stock trades about -0.01 of its potential returns per unit of risk. The Nankang Rubber Tire is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,780  in Nankang Rubber Tire on September 18, 2024 and sell it today you would lose (25.00) from holding Nankang Rubber Tire or give up 0.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Sanyang Motor Co  vs.  Nankang Rubber Tire

Sanyang Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanyang Motor 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.

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.

Pair Trading with Sanyang and Nankang Rubber

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

The idea behind Sanyang Motor Co and Nankang Rubber Tire 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.