Correlation Between Namhwa Industrial and Hyosung Chemical

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

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

Diversification Opportunities for Namhwa Industrial and Hyosung Chemical

-0.67

Correlation Coefficient

Namhwa Industrial  Hyosung Chemical

Excellent diversification

The 3 months correlation between Namhwa and Hyosung is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Namhwa Industrial Co and Hyosung Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyosung Chemical Corp and Namhwa Industrial 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 Namhwa Industrial Co are associated (or correlated) with Hyosung Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyosung Chemical Corp has no effect on the direction of Namhwa Industrial i.e., Namhwa Industrial and Hyosung Chemical go up and down completely randomly.

Pair Corralation between Namhwa Industrial and Hyosung Chemical

Assuming the 90 days trading horizon Namhwa Industrial is expected to generate 1.26 times less return on investment than Hyosung Chemical. But when comparing it to its historical volatility, Namhwa Industrial Co is 3.37 times less risky than Hyosung Chemical. It trades about 0.13 of its potential returns per unit of risk. Hyosung Chemical Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,185,000  in Hyosung Chemical Corp on September 14, 2024 and sell it today you would earn a total of  310,000  from holding Hyosung Chemical Corp or generate 7.41% return on investment over 90 days.

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

Namhwa Industrial Co  vs.  Hyosung Chemical Corp

Namhwa Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namhwa Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Hyosung Chemical Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hyosung Chemical Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyosung Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Namhwa Industrial and Hyosung Chemical

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

The idea behind Namhwa Industrial Co and Hyosung Chemical Corp 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.