Correlation Between Nanya Technology and Realtek Semiconductor

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

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

Diversification Opportunities for Nanya Technology and Realtek Semiconductor

0.21

Correlation Coefficient

Nanya Technology  Realtek Semiconductor

Modest diversification

The 3 months correlation between Nanya and Realtek is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Nanya Technology Corp and Realtek Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realtek Semiconductor and Nanya Technology 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 Nanya Technology Corp are associated (or correlated) with Realtek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realtek Semiconductor has no effect on the direction of Nanya Technology i.e., Nanya Technology and Realtek Semiconductor go up and down completely randomly.

Pair Corralation between Nanya Technology and Realtek Semiconductor

Assuming the 90 days trading horizon Nanya Technology is expected to generate 3.9 times less return on investment than Realtek Semiconductor. But when comparing it to its historical volatility, Nanya Technology Corp is 1.84 times less risky than Realtek Semiconductor. It trades about 0.03 of its potential returns per unit of risk. Realtek Semiconductor Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  51,700  in Realtek Semiconductor Corp on March 11, 2024 and sell it today you would earn a total of  1,300  from holding Realtek Semiconductor Corp or generate 2.51% return on investment over 90 days.

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

Nanya Technology Corp  vs.  Realtek Semiconductor Corp

Nanya Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nanya Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Nanya Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Realtek Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realtek Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Nanya Technology and Realtek Semiconductor

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

The idea behind Nanya Technology Corp and Realtek Semiconductor 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.