Correlation Between Dongnam Chemical and Namhwa Industrial
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical and Namhwa Industrial 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 Namhwa Industrial 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 Namhwa Industrial Co, you can compare the effects of market volatilities on Dongnam Chemical and Namhwa Industrial 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 Namhwa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and Namhwa Industrial.
Diversification Opportunities for Dongnam Chemical and Namhwa Industrial
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dongnam and Namhwa is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial 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 Namhwa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhwa Industrial has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and Namhwa Industrial go up and down completely randomly.
Pair Corralation between Dongnam Chemical and Namhwa Industrial
Assuming the 90 days trading horizon Dongnam Chemical Co is expected to under-perform the Namhwa Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Dongnam Chemical Co is 1.16 times less risky than Namhwa Industrial. The stock trades about -0.09 of its potential returns per unit of risk. The Namhwa Industrial Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 794,564 in Namhwa Industrial Co on September 12, 2024 and sell it today you would lose (268,564) from holding Namhwa Industrial Co or give up 33.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongnam Chemical Co vs. Namhwa Industrial Co
Performance |
| Timeline |
| Dongnam Chemical |
| Namhwa Industrial |
Dongnam Chemical and Namhwa Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and Namhwa Industrial
The main advantage of trading using opposite Dongnam Chemical and Namhwa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical position performs unexpectedly, Namhwa Industrial 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 Namhwa Industrial will offset losses from the drop in Namhwa Industrial's long position.| Dongnam Chemical vs. Samsung Electronics Co | Dongnam Chemical vs. Samsung Electronics Co | Dongnam Chemical vs. SK Hynix | Dongnam Chemical vs. POSCO Holdings |
| Namhwa Industrial vs. Solution Advanced Technology | Namhwa Industrial vs. Busan Industrial Co | Namhwa Industrial vs. Busan Ind | Namhwa Industrial vs. Sam Chun Dang |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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