Correlation Between MITECH CoLtd and Namyang Dairy

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

Diversification Opportunities for MITECH CoLtd and Namyang Dairy

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between MITECH and Namyang is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding MITECH CoLtd and Namyang Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namyang Dairy and MITECH CoLtd 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 MITECH CoLtd are associated (or correlated) with Namyang Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namyang Dairy has no effect on the direction of MITECH CoLtd i.e., MITECH CoLtd and Namyang Dairy go up and down completely randomly.

Pair Corralation between MITECH CoLtd and Namyang Dairy

Assuming the 90 days trading horizon MITECH CoLtd is expected to generate 0.87 times more return on investment than Namyang Dairy. However, MITECH CoLtd is 1.15 times less risky than Namyang Dairy. It trades about 0.16 of its potential returns per unit of risk. Namyang Dairy is currently generating about -0.19 per unit of risk. If you would invest  759,000  in MITECH CoLtd on September 24, 2024 and sell it today you would earn a total of  56,000  from holding MITECH CoLtd or generate 7.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

MITECH CoLtd  vs.  Namyang Dairy

 Performance 
       Timeline  
MITECH CoLtd 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in MITECH CoLtd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MITECH CoLtd may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Namyang Dairy 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Namyang Dairy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namyang Dairy sustained solid returns over the last few months and may actually be approaching a breakup point.

MITECH CoLtd and Namyang Dairy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MITECH CoLtd and Namyang Dairy

The main advantage of trading using opposite MITECH CoLtd and Namyang Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MITECH CoLtd position performs unexpectedly, Namyang Dairy 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 Namyang Dairy will offset losses from the drop in Namyang Dairy's long position.
The idea behind MITECH CoLtd and Namyang Dairy 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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