Correlation Between Tae Kyung and Namhwa Industrial

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

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

Diversification Opportunities for Tae Kyung and Namhwa Industrial

-0.57

Correlation Coefficient

Tae Kyung  Namhwa Industrial

Excellent diversification

The 3 months correlation between Tae and Namhwa is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Tae Kyung Chemical and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial and Tae Kyung 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 Tae Kyung Chemical 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 Tae Kyung i.e., Tae Kyung and Namhwa Industrial go up and down completely randomly.

Pair Corralation between Tae Kyung and Namhwa Industrial

Assuming the 90 days trading horizon Tae Kyung is expected to generate 12.28 times less return on investment than Namhwa Industrial. But when comparing it to its historical volatility, Tae Kyung Chemical is 1.05 times less risky than Namhwa Industrial. It trades about 0.01 of its potential returns per unit of risk. Namhwa Industrial Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  469,344  in Namhwa Industrial Co on October 18, 2024 and sell it today you would earn a total of  74,656  from holding Namhwa Industrial Co or generate 15.91% return on investment over 90 days.

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

Tae Kyung Chemical  vs.  Namhwa Industrial Co

Tae Kyung Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Namhwa Industrial

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namhwa Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tae Kyung and Namhwa Industrial

The main advantage of trading using opposite Tae Kyung and Namhwa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tae Kyung 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 Tae Kyung Chemical 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.