Correlation Between Hanyang ENG and Nam Hwa

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

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

Diversification Opportunities for Hanyang ENG and Nam Hwa

0.19

Correlation Coefficient

Hanyang ENG  Nam Hwa

Average diversification

The 3 months correlation between Hanyang and Nam is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Hanyang ENG Co 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 Hanyang ENG 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 Hanyang ENG Co 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 Hanyang ENG i.e., Hanyang ENG and Nam Hwa go up and down completely randomly.

Pair Corralation between Hanyang ENG and Nam Hwa

Assuming the 90 days trading horizon Hanyang ENG Co is expected to under-perform the Nam Hwa. But the stock apears to be less risky and, when comparing its historical volatility, Hanyang ENG Co is 1.94 times less risky than Nam Hwa. The stock trades about -0.13 of its potential returns per unit of risk. The Nam Hwa Construction is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  399,500  in Nam Hwa Construction on September 12, 2024 and sell it today you would earn a total of  10,000  from holding Nam Hwa Construction or generate 2.5% return on investment over 90 days.

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

Hanyang ENG Co  vs.  Nam Hwa Construction

Hanyang ENG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanyang ENG Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nam Hwa Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nam Hwa Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nam Hwa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hanyang ENG and Nam Hwa

The main advantage of trading using opposite Hanyang ENG and Nam Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanyang ENG 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 Hanyang ENG Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .