Correlation Between Namhae Chemical and Industrial Bank
Can any of the company-specific risk be diversified away by investing in both Namhae Chemical and Industrial Bank 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 Industrial Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Namhae Chemical and Industrial Bank, you can compare the effects of market volatilities on Namhae Chemical and Industrial Bank 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 Industrial Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namhae Chemical and Industrial Bank.
Diversification Opportunities for Namhae Chemical and Industrial Bank
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Namhae and Industrial is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Namhae Chemical and Industrial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank 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 Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of Namhae Chemical i.e., Namhae Chemical and Industrial Bank go up and down completely randomly.
Pair Corralation between Namhae Chemical and Industrial Bank
Assuming the 90 days trading horizon Namhae Chemical is expected to under-perform the Industrial Bank. But the stock apears to be less risky and, when comparing its historical volatility, Namhae Chemical is 1.07 times less risky than Industrial Bank. The stock trades about -0.04 of its potential returns per unit of risk. The Industrial Bank is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,277,000 in Industrial Bank on October 12, 2024 and sell it today you would earn a total of 175,000 from holding Industrial Bank or generate 13.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Namhae Chemical vs. Industrial Bank
Performance |
| Timeline |
| Namhae Chemical |
| Industrial Bank |
Namhae Chemical and Industrial Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Namhae Chemical and Industrial Bank
The main advantage of trading using opposite Namhae Chemical and Industrial Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Namhae Chemical position performs unexpectedly, Industrial Bank 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 Industrial Bank will offset losses from the drop in Industrial Bank's long position.| Namhae Chemical vs. Digital Power Communications | Namhae Chemical vs. SEOJEON ELECTRIC MACHINERY | Namhae Chemical vs. Korea Information Communications | Namhae Chemical vs. KCC Engineering Construction |
| Industrial Bank vs. Namhae Chemical | Industrial Bank vs. Samsung Life Insurance | Industrial Bank vs. Hanil Chemical Ind | Industrial Bank vs. Korean Reinsurance Co |
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 Stocks Directory module to find actively traded stocks across global markets.
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