Correlation Between KM and Namhae Chemical
Can any of the company-specific risk be diversified away by investing in both KM 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 KM and Namhae Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KM Corporation and Namhae Chemical, you can compare the effects of market volatilities on KM 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 KM with a short position of Namhae Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of KM and Namhae Chemical.
Diversification Opportunities for KM and Namhae Chemical
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between KM and Namhae is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding KM Corp. and Namhae Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhae Chemical and KM 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 KM Corporation 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 KM i.e., KM and Namhae Chemical go up and down completely randomly.
Pair Corralation between KM and Namhae Chemical
Assuming the 90 days trading horizon KM Corporation is expected to generate 3.89 times more return on investment than Namhae Chemical. However, KM is 3.89 times more volatile than Namhae Chemical. It trades about 0.02 of its potential returns per unit of risk. Namhae Chemical is currently generating about 0.01 per unit of risk. If you would invest 319,048 in KM Corporation on November 3, 2024 and sell it today you would earn a total of 6,452 from holding KM Corporation or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KM Corp. vs. Namhae Chemical
Performance |
| Timeline |
| KM Corporation |
| Namhae Chemical |
KM and Namhae Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KM and Namhae Chemical
The main advantage of trading using opposite KM and Namhae Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KM 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.| KM vs. Guyoung Technology Co | KM vs. Wireless Power Amplifier | KM vs. ADTechnology CoLtd | KM vs. Puloon Technology |
| Namhae Chemical vs. Daiyang Metal Co | Namhae Chemical vs. Eagon Industrial Co | Namhae Chemical vs. KT Submarine Telecom | Namhae Chemical vs. Korea Information Communications |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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