Correlation Between Nam Hwa and KEPCO Engineering
Can any of the company-specific risk be diversified away by investing in both Nam Hwa and KEPCO Engineering 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 KEPCO Engineering 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 KEPCO Engineering Construction, you can compare the effects of market volatilities on Nam Hwa and KEPCO Engineering 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 KEPCO Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Hwa and KEPCO Engineering.
Diversification Opportunities for Nam Hwa and KEPCO Engineering
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nam and KEPCO is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nam Hwa Construction and KEPCO Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEPCO Engineering 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 KEPCO Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEPCO Engineering has no effect on the direction of Nam Hwa i.e., Nam Hwa and KEPCO Engineering go up and down completely randomly.
Pair Corralation between Nam Hwa and KEPCO Engineering
Assuming the 90 days trading horizon Nam Hwa is expected to generate 4.24 times less return on investment than KEPCO Engineering. In addition to that, Nam Hwa is 1.39 times more volatile than KEPCO Engineering Construction. It trades about 0.01 of its total potential returns per unit of risk. KEPCO Engineering Construction is currently generating about 0.08 per unit of volatility. If you would invest 6,590,000 in KEPCO Engineering Construction on August 29, 2024 and sell it today you would earn a total of 580,000 from holding KEPCO Engineering Construction or generate 8.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.31% |
| Values | Daily Returns |
Nam Hwa Construction vs. KEPCO Engineering Construction
Performance |
| Timeline |
| Nam Hwa Construction |
| KEPCO Engineering |
Nam Hwa and KEPCO Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nam Hwa and KEPCO Engineering
The main advantage of trading using opposite Nam Hwa and KEPCO Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nam Hwa position performs unexpectedly, KEPCO Engineering 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 KEPCO Engineering will offset losses from the drop in KEPCO Engineering's long position.| Nam Hwa vs. Samsung Electronics Co | Nam Hwa vs. Samsung Electronics Co | Nam Hwa vs. KB Financial Group | Nam Hwa vs. Shinhan Financial Group |
| KEPCO Engineering vs. Samsung CT Corp | KEPCO Engineering vs. Hyundai Engineering Construction | KEPCO Engineering vs. Kolon Globalco | KEPCO Engineering vs. Camus Engineering Construction |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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