Correlation Between Korea Ratings and Namhwa Industrial
Can any of the company-specific risk be diversified away by investing in both Korea Ratings and Namhwa Industrial 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 Korea Ratings and Namhwa Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Ratings Co and Namhwa Industrial Co, you can compare the effects of market volatilities on Korea Ratings and Namhwa Industrial 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 Korea Ratings with a short position of Namhwa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Ratings and Namhwa Industrial.
Diversification Opportunities for Korea Ratings and Namhwa Industrial
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Korea and Namhwa is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Korea Ratings Co and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial and Korea Ratings 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 Korea Ratings Co are associated (or correlated) with Namhwa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhwa Industrial has no effect on the direction of Korea Ratings i.e., Korea Ratings and Namhwa Industrial go up and down completely randomly.
Pair Corralation between Korea Ratings and Namhwa Industrial
Assuming the 90 days trading horizon Korea Ratings is expected to generate 3.8 times less return on investment than Namhwa Industrial. But when comparing it to its historical volatility, Korea Ratings Co is 2.52 times less risky than Namhwa Industrial. It trades about 0.07 of its potential returns per unit of risk. Namhwa Industrial Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 488,000 in Namhwa Industrial Co on September 26, 2024 and sell it today you would earn a total of 52,000 from holding Namhwa Industrial Co or generate 10.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Korea Ratings Co vs. Namhwa Industrial Co
Performance |
Timeline |
Korea Ratings |
Namhwa Industrial |
Korea Ratings and Namhwa Industrial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Korea Ratings and Namhwa Industrial
The main advantage of trading using opposite Korea Ratings and Namhwa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Ratings position performs unexpectedly, Namhwa Industrial 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 Namhwa Industrial will offset losses from the drop in Namhwa Industrial's long position.Korea Ratings vs. Samsung Electronics Co | Korea Ratings vs. Samsung Electronics Co | Korea Ratings vs. LG Energy Solution | Korea Ratings vs. SK Hynix |
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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 Stocks Directory module to find actively traded stocks across global markets.
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