Correlation Between Insung Information and Namyang Dairy

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

By analyzing existing cross correlation between Insung Information Co and Namyang Dairy Products, you can compare the effects of market volatilities on Insung Information and Namyang Dairy 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 Insung Information with a short position of Namyang Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insung Information and Namyang Dairy.

Diversification Opportunities for Insung Information and Namyang Dairy

-0.63

Correlation Coefficient

Insung Information  Namyang Dairy

Excellent diversification

The 3 months correlation between Insung and Namyang is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Insung Information Co and Namyang Dairy Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namyang Dairy Products and Insung Information 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 Insung Information Co are associated (or correlated) with Namyang Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namyang Dairy Products has no effect on the direction of Insung Information i.e., Insung Information and Namyang Dairy go up and down completely randomly.

Pair Corralation between Insung Information and Namyang Dairy

Assuming the 90 days trading horizon Insung Information is expected to generate 19.63 times less return on investment than Namyang Dairy. But when comparing it to its historical volatility, Insung Information Co is 8.29 times less risky than Namyang Dairy. It trades about 0.02 of its potential returns per unit of risk. Namyang Dairy Products is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,728,736  in Namyang Dairy Products on October 4, 2024 and sell it today you would earn a total of  1,141,264  from holding Namyang Dairy Products or generate 24.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.34%
Values	Daily Returns

Insung Information Co  vs.  Namyang Dairy Products

Insung Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insung Information Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Namyang Dairy Products

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Namyang Dairy Products are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Namyang Dairy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Insung Information and Namyang Dairy

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

The idea behind Insung Information Co and Namyang Dairy Products 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.