Correlation Between Nam Hwa and Nongshim
Can any of the company-specific risk be diversified away by investing in both Nam Hwa and Nongshim 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 Nam Hwa and Nongshim into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nam Hwa Construction and Nongshim, you can compare the effects of market volatilities on Nam Hwa and Nongshim 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 Nam Hwa with a short position of Nongshim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Hwa and Nongshim.
Diversification Opportunities for Nam Hwa and Nongshim
Average diversification
The 3 months correlation between Nam and Nongshim is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nam Hwa Construction and Nongshim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nongshim and Nam Hwa 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 Nam Hwa Construction are associated (or correlated) with Nongshim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nongshim has no effect on the direction of Nam Hwa i.e., Nam Hwa and Nongshim go up and down completely randomly.
Pair Corralation between Nam Hwa and Nongshim
Assuming the 90 days trading horizon Nam Hwa Construction is expected to generate 0.82 times more return on investment than Nongshim. However, Nam Hwa Construction is 1.22 times less risky than Nongshim. It trades about -0.25 of its potential returns per unit of risk. Nongshim is currently generating about -0.32 per unit of risk. If you would invest 429,759 in Nam Hwa Construction on October 21, 2024 and sell it today you would lose (29,259) from holding Nam Hwa Construction or give up 6.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nam Hwa Construction vs. Nongshim
Performance |
| Timeline |
| Nam Hwa Construction |
| Nongshim |
Nam Hwa and Nongshim Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nam Hwa and Nongshim
The main advantage of trading using opposite Nam Hwa and Nongshim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nam Hwa position performs unexpectedly, Nongshim 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 Nongshim will offset losses from the drop in Nongshim's long position.| Nam Hwa vs. Hanwha Chemical Corp | Nam Hwa vs. Kukdong Oil Chemicals | Nam Hwa vs. Youngchang Chemical Co | Nam Hwa vs. Sung Bo Chemicals |
| Nongshim vs. Samsung Electronics Co | Nongshim vs. Samsung Electronics Co | Nongshim vs. LG Energy Solution | Nongshim vs. SK Hynix |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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