Correlation Between Namyang Dairy and Heungkuk Metaltech

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

By analyzing existing cross correlation between Namyang Dairy and Heungkuk Metaltech CoLtd, you can compare the effects of market volatilities on Namyang Dairy and Heungkuk Metaltech 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 Namyang Dairy with a short position of Heungkuk Metaltech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namyang Dairy and Heungkuk Metaltech.

Diversification Opportunities for Namyang Dairy and Heungkuk Metaltech

-0.37

Correlation Coefficient

Namyang Dairy  Heungkuk Metaltech

Very good diversification

The 3 months correlation between Namyang and Heungkuk is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Namyang Dairy and Heungkuk Metaltech CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heungkuk Metaltech CoLtd and Namyang Dairy 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 Namyang Dairy are associated (or correlated) with Heungkuk Metaltech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heungkuk Metaltech CoLtd has no effect on the direction of Namyang Dairy i.e., Namyang Dairy and Heungkuk Metaltech go up and down completely randomly.

Pair Corralation between Namyang Dairy and Heungkuk Metaltech

Assuming the 90 days trading horizon Namyang Dairy is expected to generate 56.95 times more return on investment than Heungkuk Metaltech. However, Namyang Dairy is 56.95 times more volatile than Heungkuk Metaltech CoLtd. It trades about 0.14 of its potential returns per unit of risk. Heungkuk Metaltech CoLtd is currently generating about 0.06 per unit of risk. If you would invest  5,950,000  in Namyang Dairy on September 23, 2024 and sell it today you would lose (30,000) from holding Namyang Dairy or give up 0.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

Namyang Dairy  vs.  Heungkuk Metaltech CoLtd

Namyang Dairy

Risk-Adjusted Performance

9 of 100

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.

Heungkuk Metaltech CoLtd

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Namyang Dairy and Heungkuk Metaltech

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

The idea behind Namyang Dairy and Heungkuk Metaltech CoLtd 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.