Correlation Between Dongxing Sec and Nanya New

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

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

Diversification Opportunities for Dongxing Sec and Nanya New

0.77

Correlation Coefficient

Dongxing Sec  Nanya New

Poor diversification

The 3 months correlation between Dongxing and Nanya is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dongxing Sec Co 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 Dongxing Sec 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 Dongxing Sec Co 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 Dongxing Sec i.e., Dongxing Sec and Nanya New go up and down completely randomly.

Pair Corralation between Dongxing Sec and Nanya New

Assuming the 90 days trading horizon Dongxing Sec is expected to generate 46.11 times less return on investment than Nanya New. But when comparing it to its historical volatility, Dongxing Sec Co is 2.16 times less risky than Nanya New. It trades about 0.01 of its potential returns per unit of risk. Nanya New Material is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,125  in Nanya New Material on December 26, 2024 and sell it today you would earn a total of  1,156  from holding Nanya New Material or generate 54.4% return on investment over 90 days.

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

Dongxing Sec Co  vs.  Nanya New Material

Dongxing Sec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dongxing Sec Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dongxing Sec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 13 (%) 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 Dongxing Sec and Nanya New

The main advantage of trading using opposite Dongxing Sec and Nanya New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongxing Sec 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 Dongxing Sec Co 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.