Correlation Between National Plastic and Namhae Chemical
Can any of the company-specific risk be diversified away by investing in both National Plastic and Namhae 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 National Plastic and Namhae Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Plastic Co and Namhae Chemical, you can compare the effects of market volatilities on National Plastic and Namhae 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 National Plastic with a short position of Namhae Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Plastic and Namhae Chemical.
Diversification Opportunities for National Plastic and Namhae Chemical
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between National and Namhae is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding National Plastic Co and Namhae Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhae Chemical and National Plastic 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 National Plastic Co are associated (or correlated) with Namhae Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhae Chemical has no effect on the direction of National Plastic i.e., National Plastic and Namhae Chemical go up and down completely randomly.
Pair Corralation between National Plastic and Namhae Chemical
Assuming the 90 days trading horizon National Plastic Co is expected to under-perform the Namhae Chemical. In addition to that, National Plastic is 1.56 times more volatile than Namhae Chemical. It trades about -0.12 of its total potential returns per unit of risk. Namhae Chemical is currently generating about -0.1 per unit of volatility. If you would invest 641,000 in Namhae Chemical on August 28, 2024 and sell it today you would lose (14,000) from holding Namhae Chemical or give up 2.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Plastic Co vs. Namhae Chemical
Performance |
| Timeline |
| National Plastic |
| Namhae Chemical |
National Plastic and Namhae Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Plastic and Namhae Chemical
The main advantage of trading using opposite National Plastic and Namhae Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Plastic position performs unexpectedly, Namhae 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 Namhae Chemical will offset losses from the drop in Namhae Chemical's long position.| National Plastic vs. Daiyang Metal Co | National Plastic vs. Heungkuk Metaltech CoLtd | National Plastic vs. ITM Semiconductor Co | National Plastic vs. Jin Air Co |
| Namhae Chemical vs. LG Chemicals | Namhae Chemical vs. Lotte Chemical Corp | Namhae Chemical vs. Hyundai Steel | Namhae Chemical vs. Seah Steel Corp |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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