Correlation Between Nam Hwa and Cheryong Electric
Can any of the company-specific risk be diversified away by investing in both Nam Hwa and Cheryong Electric 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 Cheryong Electric 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 Cheryong Electric CoLtd, you can compare the effects of market volatilities on Nam Hwa and Cheryong Electric 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 Cheryong Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Hwa and Cheryong Electric.
Diversification Opportunities for Nam Hwa and Cheryong Electric
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nam and Cheryong is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nam Hwa Construction and Cheryong Electric CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheryong Electric CoLtd 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 Cheryong Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheryong Electric CoLtd has no effect on the direction of Nam Hwa i.e., Nam Hwa and Cheryong Electric go up and down completely randomly.
Pair Corralation between Nam Hwa and Cheryong Electric
Assuming the 90 days trading horizon Nam Hwa Construction is expected to under-perform the Cheryong Electric. But the stock apears to be less risky and, when comparing its historical volatility, Nam Hwa Construction is 1.87 times less risky than Cheryong Electric. The stock trades about -0.13 of its potential returns per unit of risk. The Cheryong Electric CoLtd is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 4,351,125 in Cheryong Electric CoLtd on October 20, 2024 and sell it today you would earn a total of 1,388,875 from holding Cheryong Electric CoLtd or generate 31.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nam Hwa Construction vs. Cheryong Electric CoLtd
Performance |
| Timeline |
| Nam Hwa Construction |
| Cheryong Electric CoLtd |
Nam Hwa and Cheryong Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nam Hwa and Cheryong Electric
The main advantage of trading using opposite Nam Hwa and Cheryong Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nam Hwa position performs unexpectedly, Cheryong Electric 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 Cheryong Electric will offset losses from the drop in Cheryong Electric'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 |
| Cheryong Electric vs. Dawonsys CoLtd | Cheryong Electric vs. Elentec Co | Cheryong Electric vs. Robostar CoLtd | Cheryong Electric vs. HyVision System |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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