Correlation Between Namyang Dairy and SungMoon Electronics

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

By analyzing existing cross correlation between Namyang Dairy and SungMoon Electronics Co, you can compare the effects of market volatilities on Namyang Dairy and SungMoon Electronics 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 SungMoon Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namyang Dairy and SungMoon Electronics.

Diversification Opportunities for Namyang Dairy and SungMoon Electronics

0.38

Correlation Coefficient

Namyang Dairy  SungMoon Electronics

Weak diversification

The 3 months correlation between Namyang and SungMoon is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Namyang Dairy and SungMoon Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SungMoon Electronics 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 SungMoon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SungMoon Electronics has no effect on the direction of Namyang Dairy i.e., Namyang Dairy and SungMoon Electronics go up and down completely randomly.

Pair Corralation between Namyang Dairy and SungMoon Electronics

Assuming the 90 days trading horizon Namyang Dairy is expected to generate 1.37 times more return on investment than SungMoon Electronics. However, Namyang Dairy is 1.37 times more volatile than SungMoon Electronics Co. It trades about 0.16 of its potential returns per unit of risk. SungMoon Electronics Co is currently generating about 0.04 per unit of risk. If you would invest  5,840,000  in Namyang Dairy on December 26, 2024 and sell it today you would earn a total of  1,210,000  from holding Namyang Dairy or generate 20.72% return on investment over 90 days.

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

Namyang Dairy  vs.  SungMoon Electronics Co

Namyang Dairy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Namyang Dairy are ranked lower than 12 (%) 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.

SungMoon Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SungMoon Electronics Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SungMoon Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Namyang Dairy and SungMoon Electronics

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

The idea behind Namyang Dairy and SungMoon Electronics 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 Commodity Directory module to find actively traded commodities issued by global exchanges.