Correlation Between Nam Hwa and Lotte Chilsung
Can any of the company-specific risk be diversified away by investing in both Nam Hwa and Lotte Chilsung 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 Lotte Chilsung 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 Lotte Chilsung Beverage, you can compare the effects of market volatilities on Nam Hwa and Lotte Chilsung 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 Lotte Chilsung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Hwa and Lotte Chilsung.
Diversification Opportunities for Nam Hwa and Lotte Chilsung
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nam and Lotte is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nam Hwa Construction and Lotte Chilsung Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Chilsung Beverage 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 Lotte Chilsung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Chilsung Beverage has no effect on the direction of Nam Hwa i.e., Nam Hwa and Lotte Chilsung go up and down completely randomly.
Pair Corralation between Nam Hwa and Lotte Chilsung
Assuming the 90 days trading horizon Nam Hwa Construction is expected to generate 1.08 times more return on investment than Lotte Chilsung. However, Nam Hwa is 1.08 times more volatile than Lotte Chilsung Beverage. It trades about -0.22 of its potential returns per unit of risk. Lotte Chilsung Beverage is currently generating about -0.28 per unit of risk. If you would invest 406,500 in Nam Hwa Construction on November 8, 2024 and sell it today you would lose (22,500) from holding Nam Hwa Construction or give up 5.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nam Hwa Construction vs. Lotte Chilsung Beverage
Performance |
| Timeline |
| Nam Hwa Construction |
| Lotte Chilsung Beverage |
Nam Hwa and Lotte Chilsung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nam Hwa and Lotte Chilsung
The main advantage of trading using opposite Nam Hwa and Lotte Chilsung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nam Hwa position performs unexpectedly, Lotte Chilsung 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 Lotte Chilsung will offset losses from the drop in Lotte Chilsung's long position.| Nam Hwa vs. LAKE MATERIALS LTD | Nam Hwa vs. Daejoo Electronic Materials | Nam Hwa vs. PI Advanced Materials | Nam Hwa vs. Dongwoo Farm To |
| Lotte Chilsung vs. Ssangyong Information Communication | Lotte Chilsung vs. Nable Communications | Lotte Chilsung vs. DoubleU Games Co | Lotte Chilsung vs. PI Advanced Materials |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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