Correlation Between Kukdong Oil and Namhae Chemical
Can any of the company-specific risk be diversified away by investing in both Kukdong Oil 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 Kukdong Oil and Namhae Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kukdong Oil Chemicals and Namhae Chemical, you can compare the effects of market volatilities on Kukdong Oil 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 Kukdong Oil with a short position of Namhae Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kukdong Oil and Namhae Chemical.
Diversification Opportunities for Kukdong Oil and Namhae Chemical
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kukdong and Namhae is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Kukdong Oil Chemicals and Namhae Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhae Chemical and Kukdong Oil 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 Kukdong Oil Chemicals 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 Kukdong Oil i.e., Kukdong Oil and Namhae Chemical go up and down completely randomly.
Pair Corralation between Kukdong Oil and Namhae Chemical
Assuming the 90 days trading horizon Kukdong Oil Chemicals is expected to under-perform the Namhae Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Kukdong Oil Chemicals is 1.36 times less risky than Namhae Chemical. The stock trades about -0.14 of its potential returns per unit of risk. The Namhae Chemical is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 641,000 in Namhae Chemical on August 29, 2024 and sell it today you would lose (9,000) from holding Namhae Chemical or give up 1.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kukdong Oil Chemicals vs. Namhae Chemical
Performance |
| Timeline |
| Kukdong Oil Chemicals |
| Namhae Chemical |
Kukdong Oil and Namhae Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kukdong Oil and Namhae Chemical
The main advantage of trading using opposite Kukdong Oil and Namhae Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kukdong Oil 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.| Kukdong Oil vs. AptaBio Therapeutics | Kukdong Oil vs. Daewoo SBI SPAC | Kukdong Oil vs. Dream Security co | Kukdong Oil vs. Microfriend |
| Namhae Chemical vs. Ssangyong Information Communication | Namhae Chemical vs. Daedong Metals Co | Namhae Chemical vs. Dongil Metal Co | Namhae Chemical vs. Hanjoo Light Metal |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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