Correlation Between Jeju Beer and Nam Hwa
Can any of the company-specific risk be diversified away by investing in both Jeju Beer and Nam Hwa 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 Jeju Beer and Nam Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jeju Beer Co and Nam Hwa Construction, you can compare the effects of market volatilities on Jeju Beer and Nam Hwa 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 Jeju Beer with a short position of Nam Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Beer and Nam Hwa.
Diversification Opportunities for Jeju Beer and Nam Hwa
Significant diversification
The 3 months correlation between Jeju and Nam is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Beer Co and Nam Hwa Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nam Hwa Construction and Jeju Beer 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 Jeju Beer Co are associated (or correlated) with Nam Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nam Hwa Construction has no effect on the direction of Jeju Beer i.e., Jeju Beer and Nam Hwa go up and down completely randomly.
Pair Corralation between Jeju Beer and Nam Hwa
Assuming the 90 days trading horizon Jeju Beer Co is expected to under-perform the Nam Hwa. In addition to that, Jeju Beer is 1.72 times more volatile than Nam Hwa Construction. It trades about -0.13 of its total potential returns per unit of risk. Nam Hwa Construction is currently generating about -0.1 per unit of volatility. If you would invest 415,928 in Nam Hwa Construction on October 12, 2024 and sell it today you would lose (16,428) from holding Nam Hwa Construction or give up 3.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jeju Beer Co vs. Nam Hwa Construction
Performance |
| Timeline |
| Jeju Beer |
| Nam Hwa Construction |
Jeju Beer and Nam Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jeju Beer and Nam Hwa
The main advantage of trading using opposite Jeju Beer and Nam Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeju Beer position performs unexpectedly, Nam Hwa 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 Nam Hwa will offset losses from the drop in Nam Hwa's long position.| Jeju Beer vs. Kukdong Oil Chemicals | Jeju Beer vs. Daesung Industrial Co | Jeju Beer vs. Cheryong Industrial CoLtd | Jeju Beer vs. Hyunwoo Industrial Co |
| Nam Hwa vs. Daishin Information Communications | Nam Hwa vs. Air Busan Co | Nam Hwa vs. Jeju Air Co | Nam Hwa vs. Jeju Beer Co |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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