Correlation Between Nan Ya and Taiwan Union

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

By analyzing existing cross correlation between Nan Ya Printed and Taiwan Union Technology, you can compare the effects of market volatilities on Nan Ya and Taiwan Union 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 Ya with a short position of Taiwan Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Taiwan Union.

Diversification Opportunities for Nan Ya and Taiwan Union

0.09

Correlation Coefficient

Nan Ya  Taiwan Union

Significant diversification

The 3 months correlation between Nan and Taiwan is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Printed and Taiwan Union Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Union Technology and Nan Ya 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 Ya Printed are associated (or correlated) with Taiwan Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Union Technology has no effect on the direction of Nan Ya i.e., Nan Ya and Taiwan Union go up and down completely randomly.

Pair Corralation between Nan Ya and Taiwan Union

Assuming the 90 days trading horizon Nan Ya Printed is expected to under-perform the Taiwan Union. But the stock apears to be less risky and, when comparing its historical volatility, Nan Ya Printed is 1.16 times less risky than Taiwan Union. The stock trades about -0.4 of its potential returns per unit of risk. The Taiwan Union Technology is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  15,150  in Taiwan Union Technology on September 17, 2024 and sell it today you would earn a total of  3,250  from holding Taiwan Union Technology or generate 21.45% return on investment over 90 days.

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

Nan Ya Printed  vs.  Taiwan Union Technology

Nan Ya Printed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nan Ya Printed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Taiwan Union Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Union Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Union may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nan Ya and Taiwan Union

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

The idea behind Nan Ya Printed and Taiwan Union Technology 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.