Correlation Between Namhwa Industrial and DIGITAL CHOSUN

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Can any of the company-specific risk be diversified away by investing in both Namhwa Industrial and DIGITAL CHOSUN 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 Namhwa Industrial and DIGITAL CHOSUN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Namhwa Industrial Co and DIGITAL CHOSUN, you can compare the effects of market volatilities on Namhwa Industrial and DIGITAL CHOSUN 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 Namhwa Industrial with a short position of DIGITAL CHOSUN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namhwa Industrial and DIGITAL CHOSUN.

Diversification Opportunities for Namhwa Industrial and DIGITAL CHOSUN

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Namhwa and DIGITAL is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Namhwa Industrial Co and DIGITAL CHOSUN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIGITAL CHOSUN and Namhwa Industrial 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 Namhwa Industrial Co are associated (or correlated) with DIGITAL CHOSUN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIGITAL CHOSUN has no effect on the direction of Namhwa Industrial i.e., Namhwa Industrial and DIGITAL CHOSUN go up and down completely randomly.

Pair Corralation between Namhwa Industrial and DIGITAL CHOSUN

Assuming the 90 days trading horizon Namhwa Industrial Co is expected to generate 1.32 times more return on investment than DIGITAL CHOSUN. However, Namhwa Industrial is 1.32 times more volatile than DIGITAL CHOSUN. It trades about 0.16 of its potential returns per unit of risk. DIGITAL CHOSUN is currently generating about -0.42 per unit of risk. If you would invest  510,261  in Namhwa Industrial Co on October 16, 2024 and sell it today you would earn a total of  27,739  from holding Namhwa Industrial Co or generate 5.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Namhwa Industrial Co  vs.  DIGITAL CHOSUN

 Performance 
       Timeline  
Namhwa Industrial 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namhwa Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.
DIGITAL CHOSUN 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in DIGITAL CHOSUN are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DIGITAL CHOSUN may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Namhwa Industrial and DIGITAL CHOSUN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Namhwa Industrial and DIGITAL CHOSUN

The main advantage of trading using opposite Namhwa Industrial and DIGITAL CHOSUN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Namhwa Industrial position performs unexpectedly, DIGITAL CHOSUN 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 DIGITAL CHOSUN will offset losses from the drop in DIGITAL CHOSUN's long position.
The idea behind Namhwa Industrial Co and DIGITAL CHOSUN pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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