Correlation Between Nan Liu and Feng Tay

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

By analyzing existing cross correlation between Nan Liu Enterprise and Feng Tay Enterprises, you can compare the effects of market volatilities on Nan Liu and Feng Tay 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 Liu with a short position of Feng Tay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Liu and Feng Tay.

Diversification Opportunities for Nan Liu and Feng Tay

0.65

Correlation Coefficient

Nan Liu  Feng Tay

Poor diversification

The 3 months correlation between Nan and Feng is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nan Liu Enterprise and Feng Tay Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Feng Tay Enterprises and Nan Liu 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 Liu Enterprise are associated (or correlated) with Feng Tay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Feng Tay Enterprises has no effect on the direction of Nan Liu i.e., Nan Liu and Feng Tay go up and down completely randomly.

Pair Corralation between Nan Liu and Feng Tay

Assuming the 90 days trading horizon Nan Liu Enterprise is expected to generate 0.68 times more return on investment than Feng Tay. However, Nan Liu Enterprise is 1.48 times less risky than Feng Tay. It trades about -0.01 of its potential returns per unit of risk. Feng Tay Enterprises is currently generating about -0.04 per unit of risk. If you would invest  7,400  in Nan Liu Enterprise on September 15, 2024 and sell it today you would lose (820.00) from holding Nan Liu Enterprise or give up 11.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.58%
Values	Daily Returns

Nan Liu Enterprise  vs.  Feng Tay Enterprises

Nan Liu Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

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

Feng Tay Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Feng Tay Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Feng Tay 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 Liu and Feng Tay

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

The idea behind Nan Liu Enterprise and Feng Tay Enterprises 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.