Correlation Between Semyung Electric and Namhwa Industrial

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

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

Diversification Opportunities for Semyung Electric and Namhwa Industrial

0.49

Correlation Coefficient

Semyung Electric  Namhwa Industrial

Very weak diversification

The 3 months correlation between Semyung and Namhwa is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Semyung Electric Machinery and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial and Semyung Electric 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 Semyung Electric Machinery 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 Semyung Electric i.e., Semyung Electric and Namhwa Industrial go up and down completely randomly.

Pair Corralation between Semyung Electric and Namhwa Industrial

Assuming the 90 days trading horizon Semyung Electric Machinery is expected to generate 2.71 times more return on investment than Namhwa Industrial. However, Semyung Electric is 2.71 times more volatile than Namhwa Industrial Co. It trades about 0.12 of its potential returns per unit of risk. Namhwa Industrial Co is currently generating about 0.0 per unit of risk. If you would invest  440,720  in Semyung Electric Machinery on November 29, 2024 and sell it today you would earn a total of  142,280  from holding Semyung Electric Machinery or generate 32.28% return on investment over 90 days.

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

Semyung Electric Machinery  vs.  Namhwa Industrial Co

Semyung Electric Mac

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Semyung Electric Machinery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Semyung Electric sustained solid returns over the last few months and may actually be approaching a breakup point.

Namhwa Industrial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Semyung Electric and Namhwa Industrial

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

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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.