Correlation Between Nanya New and GRIPM Advanced

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

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

Diversification Opportunities for Nanya New and GRIPM Advanced

0.82

Correlation Coefficient

Nanya New  GRIPM Advanced

Very poor diversification

The 3 months correlation between Nanya and GRIPM is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nanya New Material and GRIPM Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRIPM Advanced Materials and Nanya New 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 Nanya New Material are associated (or correlated) with GRIPM Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRIPM Advanced Materials has no effect on the direction of Nanya New i.e., Nanya New and GRIPM Advanced go up and down completely randomly.

Pair Corralation between Nanya New and GRIPM Advanced

Assuming the 90 days trading horizon Nanya New Material is expected to generate 2.68 times more return on investment than GRIPM Advanced. However, Nanya New is 2.68 times more volatile than GRIPM Advanced Materials. It trades about 0.18 of its potential returns per unit of risk. GRIPM Advanced Materials is currently generating about 0.04 per unit of risk. If you would invest  2,226  in Nanya New Material on December 30, 2024 and sell it today you would earn a total of  1,284  from holding Nanya New Material or generate 57.68% return on investment over 90 days.

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

Nanya New Material  vs.  GRIPM Advanced Materials

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.

GRIPM Advanced Materials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GRIPM Advanced Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GRIPM Advanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nanya New and GRIPM Advanced

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

The idea behind Nanya New Material and GRIPM Advanced Materials 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.