Correlation Between Genie Music and Namhwa Industrial

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

By analyzing existing cross correlation between Genie Music and Namhwa Industrial Co, you can compare the effects of market volatilities on Genie Music 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 Genie Music with a short position of Namhwa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genie Music and Namhwa Industrial.

Diversification Opportunities for Genie Music and Namhwa Industrial

-0.14

Correlation Coefficient

Genie Music  Namhwa Industrial

Good diversification

The 3 months correlation between Genie and Namhwa is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Genie Music and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial and Genie Music 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 Genie Music 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 Genie Music i.e., Genie Music and Namhwa Industrial go up and down completely randomly.

Pair Corralation between Genie Music and Namhwa Industrial

Assuming the 90 days trading horizon Genie Music is expected to under-perform the Namhwa Industrial. In addition to that, Genie Music is 1.2 times more volatile than Namhwa Industrial Co. It trades about -0.24 of its total potential returns per unit of risk. Namhwa Industrial Co is currently generating about -0.08 per unit of volatility. If you would invest  545,000  in Namhwa Industrial Co on September 1, 2024 and sell it today you would lose (21,000) from holding Namhwa Industrial Co or give up 3.85% of portfolio value over 90 days.

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

Genie Music  vs.  Namhwa Industrial Co

Genie Music

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genie Music has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Genie Music is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Namhwa Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namhwa Industrial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Genie Music and Namhwa Industrial

The main advantage of trading using opposite Genie Music and Namhwa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genie Music 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.

The idea behind Genie Music and Namhwa Industrial 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.