Correlation Between Nam Hwa and Osang Healthcare

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

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

Diversification Opportunities for Nam Hwa and Osang Healthcare

-0.15

Correlation Coefficient

Nam Hwa  Osang Healthcare

Good diversification

The 3 months correlation between Nam and Osang is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nam Hwa Construction and Osang Healthcare Co,Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Osang Healthcare Co,Ltd and Nam Hwa 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 Nam Hwa Construction are associated (or correlated) with Osang Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Osang Healthcare Co,Ltd has no effect on the direction of Nam Hwa i.e., Nam Hwa and Osang Healthcare go up and down completely randomly.

Pair Corralation between Nam Hwa and Osang Healthcare

Assuming the 90 days trading horizon Nam Hwa Construction is expected to generate 1.23 times more return on investment than Osang Healthcare. However, Nam Hwa is 1.23 times more volatile than Osang Healthcare Co,Ltd. It trades about 0.04 of its potential returns per unit of risk. Osang Healthcare Co,Ltd is currently generating about -0.07 per unit of risk. If you would invest  398,000  in Nam Hwa Construction on September 14, 2024 and sell it today you would earn a total of  21,000  from holding Nam Hwa Construction or generate 5.28% return on investment over 90 days.

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

Nam Hwa Construction  vs.  Osang Healthcare Co,Ltd

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.

Osang Healthcare Co,Ltd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Osang Healthcare Co,Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nam Hwa and Osang Healthcare

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

The idea behind Nam Hwa Construction and Osang Healthcare Co,Ltd 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.