Correlation Between Shinil Electronics and Nam Hwa

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

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

Diversification Opportunities for Shinil Electronics and Nam Hwa

0.3

Correlation Coefficient

Shinil Electronics  Nam Hwa

Weak diversification

The 3 months correlation between Shinil and Nam is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Shinil Electronics 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 Shinil Electronics 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 Shinil Electronics 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 Shinil Electronics i.e., Shinil Electronics and Nam Hwa go up and down completely randomly.

Pair Corralation between Shinil Electronics and Nam Hwa

Assuming the 90 days trading horizon Shinil Electronics is expected to generate 10.27 times less return on investment than Nam Hwa. But when comparing it to its historical volatility, Shinil Electronics Co is 1.05 times less risky than Nam Hwa. It trades about 0.02 of its potential returns per unit of risk. Nam Hwa Construction is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  406,000  in Nam Hwa Construction on September 21, 2024 and sell it today you would earn a total of  29,000  from holding Nam Hwa Construction or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Shinil Electronics Co  vs.  Nam Hwa Construction

Shinil Electronics

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Shinil Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinil Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nam Hwa Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nam Hwa Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nam Hwa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shinil Electronics and Nam Hwa

The main advantage of trading using opposite Shinil Electronics and Nam Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinil Electronics 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.

The idea behind Shinil Electronics Co and Nam Hwa Construction 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.