Correlation Between Hunan Tyen and Nanya New

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

By analyzing existing cross correlation between Hunan Tyen Machinery and Nanya New Material, you can compare the effects of market volatilities on Hunan Tyen and Nanya New 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 Hunan Tyen with a short position of Nanya New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Tyen and Nanya New.

Diversification Opportunities for Hunan Tyen and Nanya New

0.8

Correlation Coefficient

Hunan Tyen  Nanya New

Very poor diversification

The 3 months correlation between Hunan and Nanya is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Tyen Machinery and Nanya New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanya New Material and Hunan Tyen 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 Hunan Tyen Machinery are associated (or correlated) with Nanya New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanya New Material has no effect on the direction of Hunan Tyen i.e., Hunan Tyen and Nanya New go up and down completely randomly.

Pair Corralation between Hunan Tyen and Nanya New

Assuming the 90 days trading horizon Hunan Tyen is expected to generate 1.36 times less return on investment than Nanya New. But when comparing it to its historical volatility, Hunan Tyen Machinery is 1.28 times less risky than Nanya New. It trades about 0.19 of its potential returns per unit of risk. Nanya New Material is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,023  in Nanya New Material on December 25, 2024 and sell it today you would earn a total of  1,384  from holding Nanya New Material or generate 68.41% return on investment over 90 days.

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

Hunan Tyen Machinery  vs.  Nanya New Material

Hunan Tyen Machinery

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Tyen Machinery are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Tyen sustained solid returns over the last few months and may actually be approaching a breakup point.

Nanya New Material

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nanya New Material are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanya New sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hunan Tyen and Nanya New

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

The idea behind Hunan Tyen Machinery and Nanya New Material 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.