Correlation Between Korea Shipbuilding and Nam Hwa

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

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

Diversification Opportunities for Korea Shipbuilding and Nam Hwa

0.25

Correlation Coefficient

Korea Shipbuilding  Nam Hwa

Modest diversification

The 3 months correlation between Korea and Nam is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Korea Shipbuilding Offshore 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 Korea Shipbuilding 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 Korea Shipbuilding Offshore 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 Korea Shipbuilding i.e., Korea Shipbuilding and Nam Hwa go up and down completely randomly.

Pair Corralation between Korea Shipbuilding and Nam Hwa

Assuming the 90 days trading horizon Korea Shipbuilding Offshore is expected to generate 0.88 times more return on investment than Nam Hwa. However, Korea Shipbuilding Offshore is 1.14 times less risky than Nam Hwa. It trades about 0.07 of its potential returns per unit of risk. Nam Hwa Construction is currently generating about 0.04 per unit of risk. If you would invest  19,100,000  in Korea Shipbuilding Offshore on September 14, 2024 and sell it today you would earn a total of  1,900,000  from holding Korea Shipbuilding Offshore or generate 9.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Korea Shipbuilding Offshore  vs.  Nam Hwa Construction

Korea Shipbuilding

Risk-Adjusted Performance

5 of 100

Modest

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

Nam Hwa Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nam Hwa Construction are ranked lower than 3 (%) 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 Korea Shipbuilding and Nam Hwa

The main advantage of trading using opposite Korea Shipbuilding and Nam Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Shipbuilding 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 Korea Shipbuilding Offshore 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 Transaction History module to view history of all your transactions and understand their impact on performance.