Correlation Between THRACE PLASTICS and NISSAN CHEMICAL

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

By analyzing existing cross correlation between THRACE PLASTICS and NISSAN CHEMICAL IND, you can compare the effects of market volatilities on THRACE PLASTICS and NISSAN CHEMICAL 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 THRACE PLASTICS with a short position of NISSAN CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of THRACE PLASTICS and NISSAN CHEMICAL.

Diversification Opportunities for THRACE PLASTICS and NISSAN CHEMICAL

0.26

Correlation Coefficient

THRACE PLASTICS  NISSAN CHEMICAL

Modest diversification

The 3 months correlation between THRACE and NISSAN is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding THRACE PLASTICS and NISSAN CHEMICAL IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISSAN CHEMICAL IND and THRACE PLASTICS 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 THRACE PLASTICS are associated (or correlated) with NISSAN CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISSAN CHEMICAL IND has no effect on the direction of THRACE PLASTICS i.e., THRACE PLASTICS and NISSAN CHEMICAL go up and down completely randomly.

Pair Corralation between THRACE PLASTICS and NISSAN CHEMICAL

Assuming the 90 days trading horizon THRACE PLASTICS is expected to generate 1.07 times more return on investment than NISSAN CHEMICAL. However, THRACE PLASTICS is 1.07 times more volatile than NISSAN CHEMICAL IND. It trades about 0.05 of its potential returns per unit of risk. NISSAN CHEMICAL IND is currently generating about -0.08 per unit of risk. If you would invest  379.00  in THRACE PLASTICS on September 29, 2024 and sell it today you would earn a total of  14.00  from holding THRACE PLASTICS or generate 3.69% return on investment over 90 days.

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

THRACE PLASTICS  vs.  NISSAN CHEMICAL IND

THRACE PLASTICS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in THRACE PLASTICS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, THRACE PLASTICS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

NISSAN CHEMICAL IND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NISSAN CHEMICAL IND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, NISSAN CHEMICAL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with THRACE PLASTICS and NISSAN CHEMICAL

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

The idea behind THRACE PLASTICS and NISSAN CHEMICAL IND 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.