Correlation Between Shiny Chemical and Nuvoton Technology

Can any of the company-specific risk be diversified away by investing in both Shiny Chemical and Nuvoton Technology 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 Shiny Chemical and Nuvoton Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shiny Chemical Industrial and Nuvoton Technology Corp, you can compare the effects of market volatilities on Shiny Chemical and Nuvoton Technology 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 Shiny Chemical with a short position of Nuvoton Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shiny Chemical and Nuvoton Technology.

Diversification Opportunities for Shiny Chemical and Nuvoton Technology

-0.14

Correlation Coefficient

Shiny Chemical  Nuvoton Technology

Good diversification

The 3 months correlation between Shiny and Nuvoton is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Shiny Chemical Industrial and Nuvoton Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvoton Technology Corp and Shiny Chemical 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 Shiny Chemical Industrial are associated (or correlated) with Nuvoton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvoton Technology Corp has no effect on the direction of Shiny Chemical i.e., Shiny Chemical and Nuvoton Technology go up and down completely randomly.

Pair Corralation between Shiny Chemical and Nuvoton Technology

Assuming the 90 days trading horizon Shiny Chemical is expected to generate 1.49 times less return on investment than Nuvoton Technology. But when comparing it to its historical volatility, Shiny Chemical Industrial is 1.51 times less risky than Nuvoton Technology. It trades about 0.07 of its potential returns per unit of risk. Nuvoton Technology Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,180  in Nuvoton Technology Corp on September 4, 2024 and sell it today you would earn a total of  850.00  from holding Nuvoton Technology Corp or generate 10.39% return on investment over 90 days.

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

Shiny Chemical Industrial  vs.  Nuvoton Technology Corp

Shiny Chemical Industrial

Risk-Adjusted Performance

5 of 100

Modest

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

Nuvoton Technology Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvoton Technology Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nuvoton Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shiny Chemical and Nuvoton Technology

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

The idea behind Shiny Chemical Industrial and Nuvoton Technology Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.