Correlation Between Gyeongnam Steel and Namhae Chemical
Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel and Namhae Chemical 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 Gyeongnam Steel and Namhae Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gyeongnam Steel Co and Namhae Chemical, you can compare the effects of market volatilities on Gyeongnam Steel and Namhae Chemical 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 Gyeongnam Steel with a short position of Namhae Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and Namhae Chemical.
Diversification Opportunities for Gyeongnam Steel and Namhae Chemical
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gyeongnam and Namhae is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Namhae Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhae Chemical and Gyeongnam Steel 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 Gyeongnam Steel Co are associated (or correlated) with Namhae Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhae Chemical has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and Namhae Chemical go up and down completely randomly.
Pair Corralation between Gyeongnam Steel and Namhae Chemical
Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 1.52 times more return on investment than Namhae Chemical. However, Gyeongnam Steel is 1.52 times more volatile than Namhae Chemical. It trades about 0.03 of its potential returns per unit of risk. Namhae Chemical is currently generating about -0.11 per unit of risk. If you would invest 285,000 in Gyeongnam Steel Co on September 3, 2024 and sell it today you would earn a total of 4,500 from holding Gyeongnam Steel Co or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gyeongnam Steel Co vs. Namhae Chemical
Performance |
| Timeline |
| Gyeongnam Steel |
| Namhae Chemical |
Gyeongnam Steel and Namhae Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gyeongnam Steel and Namhae Chemical
The main advantage of trading using opposite Gyeongnam Steel and Namhae Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gyeongnam Steel position performs unexpectedly, Namhae Chemical 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 Namhae Chemical will offset losses from the drop in Namhae Chemical's long position.| Gyeongnam Steel vs. Korea Investment Holdings | Gyeongnam Steel vs. NH Investment Securities | Gyeongnam Steel vs. Golden Bridge Investment | Gyeongnam Steel vs. DSC Investment |
| Namhae Chemical vs. LG Chemicals | Namhae Chemical vs. POSCO Holdings | Namhae Chemical vs. Hanwha Solutions | Namhae Chemical vs. Lotte Chemical 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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