Correlation Between Nan Pao and Double Bond

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

Diversification Opportunities for Nan Pao and Double Bond

-0.44

Correlation Coefficient

Nan Pao  Double Bond

Very good diversification

The 3 months correlation between Nan and Double is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nan Pao Resins and Double Bond Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Double Bond Chemical 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 Double Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Double Bond Chemical has no effect on the direction of Nan Pao i.e., Nan Pao and Double Bond go up and down completely randomly.

Pair Corralation between Nan Pao and Double Bond

Assuming the 90 days trading horizon Nan Pao Resins is expected to under-perform the Double Bond. In addition to that, Nan Pao is 1.61 times more volatile than Double Bond Chemical. It trades about -0.19 of its total potential returns per unit of risk. Double Bond Chemical is currently generating about -0.12 per unit of volatility. If you would invest  4,415  in Double Bond Chemical on September 24, 2024 and sell it today you would lose (105.00) from holding Double Bond Chemical or give up 2.38% of portfolio value over 90 days.

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

Nan Pao Resins  vs.  Double Bond Chemical

Nan Pao Resins

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nan Pao Resins are ranked lower than 1 (%) 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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Double Bond Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Double Bond Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Double Bond is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nan Pao and Double Bond

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

The idea behind Nan Pao Resins and Double Bond Chemical 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.