Correlation Between Namhae Chemical and Ray
Can any of the company-specific risk be diversified away by investing in both Namhae Chemical and Ray 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 Ray into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Namhae Chemical and Ray Co, you can compare the effects of market volatilities on Namhae Chemical and Ray 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 Ray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namhae Chemical and Ray.
Diversification Opportunities for Namhae Chemical and Ray
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Namhae and Ray is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Namhae Chemical and Ray Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ray Co 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 Ray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ray Co has no effect on the direction of Namhae Chemical i.e., Namhae Chemical and Ray go up and down completely randomly.
Pair Corralation between Namhae Chemical and Ray
Assuming the 90 days trading horizon Namhae Chemical is expected to generate 0.33 times more return on investment than Ray. However, Namhae Chemical is 3.01 times less risky than Ray. It trades about -0.04 of its potential returns per unit of risk. Ray Co is currently generating about -0.14 per unit of risk. If you would invest 723,049 in Namhae Chemical on September 4, 2024 and sell it today you would lose (96,049) from holding Namhae Chemical or give up 13.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Namhae Chemical vs. Ray Co
Performance |
| Timeline |
| Namhae Chemical |
| Ray Co |
Namhae Chemical and Ray Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Namhae Chemical and Ray
The main advantage of trading using opposite Namhae Chemical and Ray positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Namhae Chemical position performs unexpectedly, Ray 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 Ray will offset losses from the drop in Ray's long position.| Namhae Chemical vs. LG Chemicals | Namhae Chemical vs. POSCO Holdings | Namhae Chemical vs. Hanwha Solutions | Namhae Chemical vs. Lotte Chemical Corp |
| Ray vs. Taeyang Metal Industrial | Ray vs. Eugene Technology CoLtd | Ray vs. Daejung Chemicals Metals | Ray vs. Dong A Steel Technology |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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