Correlation Between Daelim Industrial and Namhwa Industrial

Can any of the company-specific risk be diversified away by investing in both Daelim Industrial and Namhwa Industrial 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 Daelim Industrial and Namhwa Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daelim Industrial Co and Namhwa Industrial Co, you can compare the effects of market volatilities on Daelim Industrial and Namhwa Industrial 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 Daelim Industrial with a short position of Namhwa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daelim Industrial and Namhwa Industrial.

Diversification Opportunities for Daelim Industrial and Namhwa Industrial

-0.62

Correlation Coefficient

Daelim Industrial  Namhwa Industrial

Excellent diversification

The 3 months correlation between Daelim and Namhwa is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Daelim Industrial Co and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial and Daelim 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 Daelim Industrial Co are associated (or correlated) with Namhwa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhwa Industrial has no effect on the direction of Daelim Industrial i.e., Daelim Industrial and Namhwa Industrial go up and down completely randomly.

Pair Corralation between Daelim Industrial and Namhwa Industrial

Assuming the 90 days trading horizon Daelim Industrial Co is expected to under-perform the Namhwa Industrial. In addition to that, Daelim Industrial is 1.16 times more volatile than Namhwa Industrial Co. It trades about -0.11 of its total potential returns per unit of risk. Namhwa Industrial Co is currently generating about 0.1 per unit of volatility. If you would invest  480,000  in Namhwa Industrial Co on September 12, 2024 and sell it today you would earn a total of  46,000  from holding Namhwa Industrial Co or generate 9.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Daelim Industrial Co  vs.  Namhwa Industrial Co

Daelim Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daelim Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Namhwa Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namhwa Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Daelim Industrial and Namhwa Industrial

The main advantage of trading using opposite Daelim Industrial and Namhwa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daelim Industrial position performs unexpectedly, Namhwa Industrial 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 Namhwa Industrial will offset losses from the drop in Namhwa Industrial's long position.

The idea behind Daelim Industrial Co and Namhwa Industrial Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.