Correlation Between Nan Pao and Swancor Holding

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

By analyzing existing cross correlation between Nan Pao Resins and Swancor Holding Co, you can compare the effects of market volatilities on Nan Pao and Swancor Holding 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 Nan Pao with a short position of Swancor Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Pao and Swancor Holding.

Diversification Opportunities for Nan Pao and Swancor Holding

-0.35

Correlation Coefficient

Nan Pao  Swancor Holding

Very good diversification

The 3 months correlation between Nan and Swancor is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Nan Pao Resins and Swancor Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swancor Holding and Nan Pao 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 Nan Pao Resins are associated (or correlated) with Swancor Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swancor Holding has no effect on the direction of Nan Pao i.e., Nan Pao and Swancor Holding go up and down completely randomly.

Pair Corralation between Nan Pao and Swancor Holding

Assuming the 90 days trading horizon Nan Pao Resins is expected to generate 0.7 times more return on investment than Swancor Holding. However, Nan Pao Resins is 1.42 times less risky than Swancor Holding. It trades about 0.05 of its potential returns per unit of risk. Swancor Holding Co is currently generating about -0.14 per unit of risk. If you would invest  29,900  in Nan Pao Resins on September 15, 2024 and sell it today you would earn a total of  1,600  from holding Nan Pao Resins or generate 5.35% return on investment over 90 days.

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

Nan Pao Resins  vs.  Swancor Holding Co

Nan Pao Resins

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nan Pao Resins are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Nan Pao is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Swancor Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swancor Holding Co 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 Nan Pao and Swancor Holding

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

The idea behind Nan Pao Resins and Swancor Holding 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.