Correlation Between Nam Hwa and System
Can any of the company-specific risk be diversified away by investing in both Nam Hwa and System 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 System 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 System and Application, you can compare the effects of market volatilities on Nam Hwa and System 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 System. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Hwa and System.
Diversification Opportunities for Nam Hwa and System
Average diversification
The 3 months correlation between Nam and System is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nam Hwa Construction and System and Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System and Application 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 System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System and Application has no effect on the direction of Nam Hwa i.e., Nam Hwa and System go up and down completely randomly.
Pair Corralation between Nam Hwa and System
Assuming the 90 days trading horizon Nam Hwa Construction is expected to generate 1.87 times more return on investment than System. However, Nam Hwa is 1.87 times more volatile than System and Application. It trades about 0.05 of its potential returns per unit of risk. System and Application is currently generating about 0.08 per unit of risk. If you would invest 398,000 in Nam Hwa Construction on August 29, 2024 and sell it today you would earn a total of 11,500 from holding Nam Hwa Construction or generate 2.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nam Hwa Construction vs. System and Application
Performance |
| Timeline |
| Nam Hwa Construction |
| System and Application |
Nam Hwa and System Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nam Hwa and System
The main advantage of trading using opposite Nam Hwa and System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nam Hwa position performs unexpectedly, System 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 System will offset losses from the drop in System's long position.| Nam Hwa vs. Samyung Trading Co | Nam Hwa vs. Lindeman Asia Investment | Nam Hwa vs. Atinum Investment Co | Nam Hwa vs. Korea Investment Holdings |
| System vs. Korea Real Estate | System vs. Korea Ratings Co | System vs. IQuest Co | System vs. Wonbang Tech Co |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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