Correlation Between Nam Hwa and Seoam Machinery
Can any of the company-specific risk be diversified away by investing in both Nam Hwa and Seoam Machinery 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 Seoam Machinery 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 Seoam Machinery Industry, you can compare the effects of market volatilities on Nam Hwa and Seoam Machinery 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 Seoam Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Hwa and Seoam Machinery.
Diversification Opportunities for Nam Hwa and Seoam Machinery
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nam and Seoam is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nam Hwa Construction and Seoam Machinery Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoam Machinery Industry 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 Seoam Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoam Machinery Industry has no effect on the direction of Nam Hwa i.e., Nam Hwa and Seoam Machinery go up and down completely randomly.
Pair Corralation between Nam Hwa and Seoam Machinery
Assuming the 90 days trading horizon Nam Hwa is expected to generate 1.3 times less return on investment than Seoam Machinery. In addition to that, Nam Hwa is 1.97 times more volatile than Seoam Machinery Industry. It trades about 0.05 of its total potential returns per unit of risk. Seoam Machinery Industry is currently generating about 0.13 per unit of volatility. If you would invest 377,000 in Seoam Machinery Industry on August 29, 2024 and sell it today you would earn a total of 25,000 from holding Seoam Machinery Industry or generate 6.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nam Hwa Construction vs. Seoam Machinery Industry
Performance |
| Timeline |
| Nam Hwa Construction |
| Seoam Machinery Industry |
Nam Hwa and Seoam Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nam Hwa and Seoam Machinery
The main advantage of trading using opposite Nam Hwa and Seoam Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nam Hwa position performs unexpectedly, Seoam Machinery 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 Seoam Machinery will offset losses from the drop in Seoam Machinery'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 |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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