Correlation Between Namhae Chemical and Korea Petro
Can any of the company-specific risk be diversified away by investing in both Namhae Chemical and Korea Petro 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 Namhae Chemical and Korea Petro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Namhae Chemical and Korea Petro Chemical, you can compare the effects of market volatilities on Namhae Chemical and Korea Petro 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 Namhae Chemical with a short position of Korea Petro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namhae Chemical and Korea Petro.
Diversification Opportunities for Namhae Chemical and Korea Petro
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Namhae and Korea is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Namhae Chemical and Korea Petro Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Petro Chemical and Namhae 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 Namhae Chemical are associated (or correlated) with Korea Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Petro Chemical has no effect on the direction of Namhae Chemical i.e., Namhae Chemical and Korea Petro go up and down completely randomly.
Pair Corralation between Namhae Chemical and Korea Petro
Assuming the 90 days trading horizon Namhae Chemical is expected to generate 0.39 times more return on investment than Korea Petro. However, Namhae Chemical is 2.54 times less risky than Korea Petro. It trades about -0.1 of its potential returns per unit of risk. Korea Petro Chemical is currently generating about -0.31 per unit of risk. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Namhae Chemical vs. Korea Petro Chemical
Performance |
| Timeline |
| Namhae Chemical |
| Korea Petro Chemical |
Namhae Chemical and Korea Petro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Namhae Chemical and Korea Petro
The main advantage of trading using opposite Namhae Chemical and Korea Petro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Namhae Chemical position performs unexpectedly, Korea Petro 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 Korea Petro will offset losses from the drop in Korea Petro's long position.| Namhae Chemical vs. LG Chemicals | Namhae Chemical vs. Lotte Chemical Corp | Namhae Chemical vs. Hyundai Steel | Namhae Chemical vs. Seah Steel Corp |
| Korea Petro vs. LG Chemicals | Korea Petro vs. Lotte Chemical Corp | Korea Petro vs. Hyundai Steel | Korea Petro 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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