Correlation Between Celltrion and Namyang Dairy

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

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

Diversification Opportunities for Celltrion and Namyang Dairy

-0.67

Correlation Coefficient

Celltrion  Namyang Dairy

Excellent diversification

The 3 months correlation between Celltrion and Namyang is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Celltrion and Namyang Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namyang Dairy and Celltrion 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 Celltrion 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 has no effect on the direction of Celltrion i.e., Celltrion and Namyang Dairy go up and down completely randomly.

Pair Corralation between Celltrion and Namyang Dairy

Assuming the 90 days trading horizon Celltrion is expected to generate 810.83 times less return on investment than Namyang Dairy. But when comparing it to its historical volatility, Celltrion is 54.97 times less risky than Namyang Dairy. It trades about 0.01 of its potential returns per unit of risk. Namyang Dairy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,770,000  in Namyang Dairy on October 14, 2024 and sell it today you would earn a total of  370,000  from holding Namyang Dairy or generate 6.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Celltrion  vs.  Namyang Dairy

Celltrion

Risk-Adjusted Performance

0 of 100

Very Weak

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

Namyang Dairy

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Celltrion and Namyang Dairy

The main advantage of trading using opposite Celltrion and Namyang Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celltrion 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 Celltrion and Namyang Dairy 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.