Correlation Between Korea Investment and Namhwa Industrial
Can any of the company-specific risk be diversified away by investing in both Korea Investment and Namhwa Industrial 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 Korea Investment and Namhwa Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Investment Holdings and Namhwa Industrial Co, you can compare the effects of market volatilities on Korea Investment and Namhwa Industrial 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 Korea Investment with a short position of Namhwa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Investment and Namhwa Industrial.
Diversification Opportunities for Korea Investment and Namhwa Industrial
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korea and Namhwa is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Korea Investment Holdings and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial and Korea Investment 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 Korea Investment Holdings are associated (or correlated) with Namhwa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhwa Industrial has no effect on the direction of Korea Investment i.e., Korea Investment and Namhwa Industrial go up and down completely randomly.
Pair Corralation between Korea Investment and Namhwa Industrial
Assuming the 90 days trading horizon Korea Investment Holdings is expected to generate 1.03 times more return on investment than Namhwa Industrial. However, Korea Investment is 1.03 times more volatile than Namhwa Industrial Co. It trades about 0.04 of its potential returns per unit of risk. Namhwa Industrial Co is currently generating about -0.06 per unit of risk. If you would invest 4,302,145 in Korea Investment Holdings on September 12, 2024 and sell it today you would earn a total of 1,077,855 from holding Korea Investment Holdings or generate 25.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Investment Holdings vs. Namhwa Industrial Co
Performance |
| Timeline |
| Korea Investment Holdings |
| Namhwa Industrial |
Korea Investment and Namhwa Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Investment and Namhwa Industrial
The main advantage of trading using opposite Korea Investment and Namhwa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Investment position performs unexpectedly, Namhwa Industrial 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 Namhwa Industrial will offset losses from the drop in Namhwa Industrial's long position.| Korea Investment vs. LAKE MATERIALS LTD | Korea Investment vs. Hyundai Engineering Plastics | Korea Investment vs. Top Material Co | Korea Investment vs. Kbi Metal Co |
| Namhwa Industrial vs. Solution Advanced Technology | Namhwa Industrial vs. Busan Industrial Co | Namhwa Industrial vs. Busan Ind | Namhwa Industrial vs. Sam Chun Dang |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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