Correlation Between BenQ Materials and Nankang Rubber

Can any of the company-specific risk be diversified away by investing in both BenQ Materials and Nankang Rubber 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 BenQ Materials and Nankang Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BenQ Materials Corp and Nankang Rubber Tire, you can compare the effects of market volatilities on BenQ Materials and Nankang Rubber 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 BenQ Materials with a short position of Nankang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of BenQ Materials and Nankang Rubber.

Diversification Opportunities for BenQ Materials and Nankang Rubber

-0.3

Correlation Coefficient

BenQ Materials  Nankang Rubber

Very good diversification

The 3 months correlation between BenQ and Nankang is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding BenQ Materials Corp and Nankang Rubber Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nankang Rubber Tire and BenQ Materials 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 BenQ Materials Corp are associated (or correlated) with Nankang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nankang Rubber Tire has no effect on the direction of BenQ Materials i.e., BenQ Materials and Nankang Rubber go up and down completely randomly.

Pair Corralation between BenQ Materials and Nankang Rubber

Assuming the 90 days trading horizon BenQ Materials Corp is expected to under-perform the Nankang Rubber. But the stock apears to be less risky and, when comparing its historical volatility, BenQ Materials Corp is 1.34 times less risky than Nankang Rubber. The stock trades about -0.01 of its potential returns per unit of risk. The Nankang Rubber Tire is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,855  in Nankang Rubber Tire on September 12, 2024 and sell it today you would earn a total of  1,085  from holding Nankang Rubber Tire or generate 28.15% return on investment over 90 days.

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

BenQ Materials Corp  vs.  Nankang Rubber Tire

BenQ Materials Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BenQ Materials Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, BenQ Materials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nankang Rubber Tire

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nankang Rubber Tire has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Nankang Rubber 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 BenQ Materials and Nankang Rubber

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

The idea behind BenQ Materials Corp and Nankang Rubber Tire 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.