Correlation Between Nam Hwa and Sebo Manufacturing
Can any of the company-specific risk be diversified away by investing in both Nam Hwa and Sebo Manufacturing 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 Sebo Manufacturing 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 Sebo Manufacturing Engineering, you can compare the effects of market volatilities on Nam Hwa and Sebo Manufacturing 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 Sebo Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Hwa and Sebo Manufacturing.
Diversification Opportunities for Nam Hwa and Sebo Manufacturing
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nam and Sebo is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nam Hwa Construction and Sebo Manufacturing Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sebo Manufacturing 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 Sebo Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sebo Manufacturing has no effect on the direction of Nam Hwa i.e., Nam Hwa and Sebo Manufacturing go up and down completely randomly.
Pair Corralation between Nam Hwa and Sebo Manufacturing
Assuming the 90 days trading horizon Nam Hwa Construction is expected to generate 1.8 times more return on investment than Sebo Manufacturing. However, Nam Hwa is 1.8 times more volatile than Sebo Manufacturing Engineering. It trades about 0.05 of its potential returns per unit of risk. Sebo Manufacturing Engineering is currently generating about 0.04 per unit of risk. If you would invest 398,000 in Nam Hwa Construction on August 28, 2024 and sell it today you would earn a total of 10,500 from holding Nam Hwa Construction or generate 2.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nam Hwa Construction vs. Sebo Manufacturing Engineering
Performance |
| Timeline |
| Nam Hwa Construction |
| Sebo Manufacturing |
Nam Hwa and Sebo Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nam Hwa and Sebo Manufacturing
The main advantage of trading using opposite Nam Hwa and Sebo Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nam Hwa position performs unexpectedly, Sebo Manufacturing 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 Sebo Manufacturing will offset losses from the drop in Sebo Manufacturing's long position.| Nam Hwa vs. Shin Steel Co | Nam Hwa vs. Moonbae Steel | Nam Hwa vs. Kukdong Oil Chemicals | Nam Hwa vs. Sung Bo Chemicals |
| Sebo Manufacturing vs. Samsung Electronics Co | Sebo Manufacturing vs. Samsung Electronics Co | Sebo Manufacturing vs. Hyundai Motor Co | Sebo Manufacturing vs. Hyundai Motor |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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