Correlation Between Cloud Air and Namhwa Industrial

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

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

Diversification Opportunities for Cloud Air and Namhwa Industrial

-0.68

Correlation Coefficient

Cloud Air  Namhwa Industrial

Excellent diversification

The 3 months correlation between Cloud and Namhwa is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cloud Air CoLtd and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial and Cloud Air 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 Cloud Air CoLtd 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 Cloud Air i.e., Cloud Air and Namhwa Industrial go up and down completely randomly.

Pair Corralation between Cloud Air and Namhwa Industrial

Assuming the 90 days trading horizon Cloud Air CoLtd is expected to under-perform the Namhwa Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Cloud Air CoLtd is 1.11 times less risky than Namhwa Industrial. The stock trades about -0.16 of its potential returns per unit of risk. The Namhwa Industrial Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  480,000  in Namhwa Industrial Co on September 12, 2024 and sell it today you would earn a total of  46,000  from holding Namhwa Industrial Co or generate 9.58% return on investment over 90 days.

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

Cloud Air CoLtd  vs.  Namhwa Industrial Co

Cloud Air CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cloud Air CoLtd 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Namhwa Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namhwa Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cloud Air and Namhwa Industrial

The main advantage of trading using opposite Cloud Air and Namhwa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cloud Air 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 Cloud Air CoLtd 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..