Correlation Between Kolon Plastics and Namhae Chemical
Can any of the company-specific risk be diversified away by investing in both Kolon Plastics and Namhae Chemical 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 Kolon Plastics and Namhae Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kolon Plastics and Namhae Chemical, you can compare the effects of market volatilities on Kolon Plastics and Namhae Chemical 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 Kolon Plastics with a short position of Namhae Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kolon Plastics and Namhae Chemical.
Diversification Opportunities for Kolon Plastics and Namhae Chemical
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kolon and Namhae is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Kolon Plastics and Namhae Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhae Chemical and Kolon Plastics 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 Kolon Plastics are associated (or correlated) with Namhae Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhae Chemical has no effect on the direction of Kolon Plastics i.e., Kolon Plastics and Namhae Chemical go up and down completely randomly.
Pair Corralation between Kolon Plastics and Namhae Chemical
Assuming the 90 days trading horizon Kolon Plastics is expected to generate 1.23 times more return on investment than Namhae Chemical. However, Kolon Plastics is 1.23 times more volatile than Namhae Chemical. It trades about 0.13 of its potential returns per unit of risk. Namhae Chemical is currently generating about 0.01 per unit of risk. If you would invest 536,000 in Kolon Plastics on October 13, 2024 and sell it today you would earn a total of 22,000 from holding Kolon Plastics or generate 4.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kolon Plastics vs. Namhae Chemical
Performance |
| Timeline |
| Kolon Plastics |
| Namhae Chemical |
Kolon Plastics and Namhae Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kolon Plastics and Namhae Chemical
The main advantage of trading using opposite Kolon Plastics and Namhae Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kolon Plastics position performs unexpectedly, Namhae Chemical 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 Namhae Chemical will offset losses from the drop in Namhae Chemical's long position.| Kolon Plastics vs. Hyundai Home Shopping | Kolon Plastics vs. Daejung Chemicals Metals | Kolon Plastics vs. Organic Special Pet | Kolon Plastics vs. SK Chemicals Co |
| Namhae Chemical vs. Jeju Beer Co | Namhae Chemical vs. Hana Materials | Namhae Chemical vs. Hanjin Transportation Co | Namhae Chemical vs. Kolon Plastics |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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