Correlation Between Namhae Chemical and Gyeongnam Steel
Can any of the company-specific risk be diversified away by investing in both Namhae Chemical and Gyeongnam 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 Gyeongnam 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 Gyeongnam Steel Co, you can compare the effects of market volatilities on Namhae Chemical and Gyeongnam 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 Gyeongnam Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namhae Chemical and Gyeongnam Steel.
Diversification Opportunities for Namhae Chemical and Gyeongnam Steel
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Namhae and Gyeongnam is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Namhae Chemical and Gyeongnam Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gyeongnam Steel 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 Gyeongnam Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gyeongnam Steel has no effect on the direction of Namhae Chemical i.e., Namhae Chemical and Gyeongnam Steel go up and down completely randomly.
Pair Corralation between Namhae Chemical and Gyeongnam Steel
Assuming the 90 days trading horizon Namhae Chemical is expected to under-perform the Gyeongnam Steel. But the stock apears to be less risky and, when comparing its historical volatility, Namhae Chemical is 1.8 times less risky than Gyeongnam Steel. The stock trades about -0.09 of its potential returns per unit of risk. The Gyeongnam Steel Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 286,500 in Gyeongnam Steel Co on September 3, 2024 and sell it today you would earn a total of 3,000 from holding Gyeongnam Steel Co or generate 1.05% 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. Gyeongnam Steel Co
Performance |
| Timeline |
| Namhae Chemical |
| Gyeongnam Steel |
Namhae Chemical and Gyeongnam Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Namhae Chemical and Gyeongnam Steel
The main advantage of trading using opposite Namhae Chemical and Gyeongnam Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Namhae Chemical position performs unexpectedly, Gyeongnam 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 Gyeongnam Steel will offset losses from the drop in Gyeongnam Steel's long position.| Namhae Chemical vs. LG Chemicals | Namhae Chemical vs. POSCO Holdings | Namhae Chemical vs. Hanwha Solutions | Namhae Chemical vs. Lotte Chemical Corp |
| Gyeongnam Steel vs. Korea Investment Holdings | Gyeongnam Steel vs. NH Investment Securities | Gyeongnam Steel vs. Golden Bridge Investment | Gyeongnam Steel vs. DSC Investment |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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