Correlation Between Nam Hwa and Itcen Co
Can any of the company-specific risk be diversified away by investing in both Nam Hwa and Itcen Co 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 Itcen Co 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 Itcen Co, you can compare the effects of market volatilities on Nam Hwa and Itcen Co 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 Itcen Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Hwa and Itcen Co.
Diversification Opportunities for Nam Hwa and Itcen Co
Good diversification
The 3 months correlation between Nam and Itcen is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nam Hwa Construction and Itcen Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itcen Co 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 Itcen Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itcen Co has no effect on the direction of Nam Hwa i.e., Nam Hwa and Itcen Co go up and down completely randomly.
Pair Corralation between Nam Hwa and Itcen Co
Assuming the 90 days trading horizon Nam Hwa Construction is expected to generate 0.34 times more return on investment than Itcen Co. However, Nam Hwa Construction is 2.93 times less risky than Itcen Co. It trades about 0.12 of its potential returns per unit of risk. Itcen Co is currently generating about -0.03 per unit of risk. If you would invest 408,500 in Nam Hwa Construction on September 26, 2024 and sell it today you would earn a total of 17,500 from holding Nam Hwa Construction or generate 4.28% 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. Itcen Co
Performance |
| Timeline |
| Nam Hwa Construction |
| Itcen Co |
Nam Hwa and Itcen Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nam Hwa and Itcen Co
The main advantage of trading using opposite Nam Hwa and Itcen Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nam Hwa position performs unexpectedly, Itcen Co 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 Itcen Co will offset losses from the drop in Itcen Co's long position.| Nam Hwa vs. Busan Industrial Co | Nam Hwa vs. Busan Ind | Nam Hwa vs. Mirae Asset Daewoo | Nam Hwa vs. Shinhan WTI Futures |
| Itcen Co vs. Air Busan Co | Itcen Co vs. Hanjin Transportation Co | Itcen Co vs. Nam Hwa Construction | Itcen Co vs. Kyeryong Construction Industrial |
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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