Correlation Between Dongnam Chemical and Namhae Chemical
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical 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 Dongnam Chemical and Namhae Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongnam Chemical Co and Namhae Chemical, you can compare the effects of market volatilities on Dongnam Chemical 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 Dongnam Chemical with a short position of Namhae Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and Namhae Chemical.
Diversification Opportunities for Dongnam Chemical and Namhae Chemical
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongnam and Namhae is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and Namhae Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhae Chemical and Dongnam Chemical 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 Dongnam Chemical 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 Dongnam Chemical i.e., Dongnam Chemical and Namhae Chemical go up and down completely randomly.
Pair Corralation between Dongnam Chemical and Namhae Chemical
Assuming the 90 days trading horizon Dongnam Chemical Co is expected to under-perform the Namhae Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Dongnam Chemical Co is 1.12 times less risky than Namhae Chemical. The stock trades about -0.09 of its potential returns per unit of risk. The Namhae Chemical is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 881,424 in Namhae Chemical on September 3, 2024 and sell it today you would lose (254,424) from holding Namhae Chemical or give up 28.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongnam Chemical Co vs. Namhae Chemical
Performance |
| Timeline |
| Dongnam Chemical |
| Namhae Chemical |
Dongnam Chemical and Namhae Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and Namhae Chemical
The main advantage of trading using opposite Dongnam Chemical and Namhae Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical 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.| Dongnam Chemical vs. BNK Financial Group | Dongnam Chemical vs. FNSTech Co | Dongnam Chemical vs. Shinhan Financial Group | Dongnam Chemical vs. Korea Shipbuilding Offshore |
| Namhae Chemical vs. LG Chemicals | Namhae Chemical vs. POSCO Holdings | Namhae Chemical vs. Hanwha Solutions | Namhae Chemical vs. Lotte Chemical 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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