Correlation Between NH Investment and Gyeongnam Steel

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

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

Diversification Opportunities for NH Investment and Gyeongnam Steel

-0.12

Correlation Coefficient

NH Investment  Gyeongnam Steel

Good diversification

The 3 months correlation between 005940 and Gyeongnam is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding NH Investment Securities and Gyeongnam Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gyeongnam Steel and NH Investment 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 NH Investment Securities are associated (or correlated) with Gyeongnam Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gyeongnam Steel has no effect on the direction of NH Investment i.e., NH Investment and Gyeongnam Steel go up and down completely randomly.

Pair Corralation between NH Investment and Gyeongnam Steel

Assuming the 90 days trading horizon NH Investment Securities is expected to under-perform the Gyeongnam Steel. In addition to that, NH Investment is 1.07 times more volatile than Gyeongnam Steel Co. It trades about -0.04 of its total potential returns per unit of risk. Gyeongnam Steel Co is currently generating about 0.03 per unit of volatility. If you would invest  285,000  in Gyeongnam Steel Co on September 3, 2024 and sell it today you would earn a total of  4,500  from holding Gyeongnam Steel Co or generate 1.58% return on investment over 90 days.

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

NH Investment Securities  vs.  Gyeongnam Steel Co

NH Investment Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gyeongnam Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gyeongnam Steel Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Gyeongnam Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NH Investment and Gyeongnam Steel

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

The idea behind NH Investment Securities and Gyeongnam Steel 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.