Correlation Between Daishin Information and Nam Hwa

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

By analyzing existing cross correlation between Daishin Information Communications and Nam Hwa Construction, you can compare the effects of market volatilities on Daishin Information and Nam Hwa 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 Daishin Information with a short position of Nam Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daishin Information and Nam Hwa.

Diversification Opportunities for Daishin Information and Nam Hwa

-0.01

Correlation Coefficient

Daishin Information  Nam Hwa

Good diversification

The 3 months correlation between Daishin and Nam is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Information Communicat and Nam Hwa Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nam Hwa Construction and Daishin Information 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 Daishin Information Communications are associated (or correlated) with Nam Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nam Hwa Construction has no effect on the direction of Daishin Information i.e., Daishin Information and Nam Hwa go up and down completely randomly.

Pair Corralation between Daishin Information and Nam Hwa

Assuming the 90 days trading horizon Daishin Information Communications is expected to generate 0.68 times more return on investment than Nam Hwa. However, Daishin Information Communications is 1.47 times less risky than Nam Hwa. It trades about 0.14 of its potential returns per unit of risk. Nam Hwa Construction is currently generating about 0.04 per unit of risk. If you would invest  88,300  in Daishin Information Communications on September 13, 2024 and sell it today you would earn a total of  15,900  from holding Daishin Information Communications or generate 18.01% return on investment over 90 days.

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

Daishin Information Communicat  vs.  Nam Hwa Construction

Daishin Information

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Daishin Information Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daishin Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Nam Hwa Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nam Hwa Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nam Hwa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Daishin Information and Nam Hwa

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

The idea behind Daishin Information Communications and Nam Hwa Construction 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.