Correlation Between Nankang Rubber and Yulon

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

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

Diversification Opportunities for Nankang Rubber and Yulon

-0.35

Correlation Coefficient

Nankang Rubber  Yulon

Very good diversification

The 3 months correlation between Nankang and Yulon is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Nankang Rubber Tire and Yulon Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yulon Motor and Nankang Rubber 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 Nankang Rubber Tire are associated (or correlated) with Yulon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yulon Motor has no effect on the direction of Nankang Rubber i.e., Nankang Rubber and Yulon go up and down completely randomly.

Pair Corralation between Nankang Rubber and Yulon

Assuming the 90 days trading horizon Nankang Rubber Tire is expected to under-perform the Yulon. But the stock apears to be less risky and, when comparing its historical volatility, Nankang Rubber Tire is 1.0 times less risky than Yulon. The stock trades about -0.01 of its potential returns per unit of risk. The Yulon Motor Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,010  in Yulon Motor Co on September 5, 2024 and sell it today you would earn a total of  750.00  from holding Yulon Motor Co or generate 14.97% return on investment over 90 days.

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

Nankang Rubber Tire  vs.  Yulon Motor Co

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.

Yulon Motor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yulon Motor Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yulon showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nankang Rubber and Yulon

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

The idea behind Nankang Rubber Tire and Yulon Motor Co 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.