Correlation Between Namhae Chemical and Hankuk Steel
Can any of the company-specific risk be diversified away by investing in both Namhae Chemical and Hankuk Steel 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 Hankuk Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Namhae Chemical and Hankuk Steel Wire, you can compare the effects of market volatilities on Namhae Chemical and Hankuk Steel 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 Hankuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namhae Chemical and Hankuk Steel.
Diversification Opportunities for Namhae Chemical and Hankuk Steel
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Namhae and Hankuk is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Namhae Chemical and Hankuk Steel Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankuk Steel Wire 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 Hankuk Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankuk Steel Wire has no effect on the direction of Namhae Chemical i.e., Namhae Chemical and Hankuk Steel go up and down completely randomly.
Pair Corralation between Namhae Chemical and Hankuk Steel
Assuming the 90 days trading horizon Namhae Chemical is expected to generate 0.77 times more return on investment than Hankuk Steel. However, Namhae Chemical is 1.3 times less risky than Hankuk Steel. It trades about -0.04 of its potential returns per unit of risk. Hankuk Steel Wire is currently generating about -0.05 per unit of risk. If you would invest 720,073 in Namhae Chemical on August 29, 2024 and sell it today you would lose (88,073) from holding Namhae Chemical or give up 12.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Namhae Chemical vs. Hankuk Steel Wire
Performance |
| Timeline |
| Namhae Chemical |
| Hankuk Steel Wire |
Namhae Chemical and Hankuk Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Namhae Chemical and Hankuk Steel
The main advantage of trading using opposite Namhae Chemical and Hankuk Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Namhae Chemical position performs unexpectedly, Hankuk Steel 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 Hankuk Steel will offset losses from the drop in Hankuk Steel's long position.| Namhae Chemical vs. Ssangyong Information Communication | Namhae Chemical vs. Daedong Metals Co | Namhae Chemical vs. Dongil Metal Co | Namhae Chemical vs. Hanjoo Light Metal |
| Hankuk Steel vs. Hanjoo Light Metal | Hankuk Steel vs. Automobile Pc | Hankuk Steel vs. Dongil Metal Co | Hankuk Steel vs. Dongbang Transport Logistics |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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