Correlation Between Woori Technology and Nam Hwa
Can any of the company-specific risk be diversified away by investing in both Woori Technology and Nam Hwa 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 Woori Technology and Nam Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woori Technology Investment and Nam Hwa Construction, you can compare the effects of market volatilities on Woori Technology and Nam Hwa 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 Woori Technology with a short position of Nam Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woori Technology and Nam Hwa.
Diversification Opportunities for Woori Technology and Nam Hwa
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Woori and Nam is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Woori Technology Investment and Nam Hwa Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nam Hwa Construction and Woori Technology 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 Woori Technology Investment are associated (or correlated) with Nam Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nam Hwa Construction has no effect on the direction of Woori Technology i.e., Woori Technology and Nam Hwa go up and down completely randomly.
Pair Corralation between Woori Technology and Nam Hwa
Assuming the 90 days trading horizon Woori Technology Investment is expected to generate 1.17 times more return on investment than Nam Hwa. However, Woori Technology is 1.17 times more volatile than Nam Hwa Construction. It trades about 0.12 of its potential returns per unit of risk. Nam Hwa Construction is currently generating about 0.05 per unit of risk. If you would invest 828,000 in Woori Technology Investment on August 29, 2024 and sell it today you would earn a total of 100,000 from holding Woori Technology Investment or generate 12.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woori Technology Investment vs. Nam Hwa Construction
Performance |
| Timeline |
| Woori Technology Inv |
| Nam Hwa Construction |
Woori Technology and Nam Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woori Technology and Nam Hwa
The main advantage of trading using opposite Woori Technology and Nam Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woori Technology position performs unexpectedly, Nam Hwa 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 Nam Hwa will offset losses from the drop in Nam Hwa's long position.| Woori Technology vs. Korea New Network | Woori Technology vs. Dong A Eltek | Woori Technology vs. Dreamus Company | Woori Technology vs. SK Bioscience Co |
| Nam Hwa vs. Samyung Trading Co | Nam Hwa vs. Lindeman Asia Investment | Nam Hwa vs. Atinum Investment Co | Nam Hwa vs. Korea Investment Holdings |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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