Correlation Between EBEST Investment and Namyang Dairy

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

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

Diversification Opportunities for EBEST Investment and Namyang Dairy

-0.54

Correlation Coefficient

EBEST Investment  Namyang Dairy

Excellent diversification

The 3 months correlation between EBEST and Namyang is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding EBEST Investment Securities and Namyang Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namyang Dairy and EBEST Investment 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 EBEST Investment Securities 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 EBEST Investment i.e., EBEST Investment and Namyang Dairy go up and down completely randomly.

Pair Corralation between EBEST Investment and Namyang Dairy

Assuming the 90 days trading horizon EBEST Investment Securities is expected to under-perform the Namyang Dairy. But the stock apears to be less risky and, when comparing its historical volatility, EBEST Investment Securities is 91.11 times less risky than Namyang Dairy. The stock trades about -0.19 of its potential returns per unit of risk. The Namyang Dairy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,740,000  in Namyang Dairy on September 4, 2024 and sell it today you would earn a total of  2,270,000  from holding Namyang Dairy or generate 47.89% return on investment over 90 days.

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

EBEST Investment Securities  vs.  Namyang Dairy

EBEST Investment Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EBEST Investment Securities 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.

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 EBEST Investment and Namyang Dairy

The main advantage of trading using opposite EBEST Investment and Namyang Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBEST Investment 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 EBEST Investment Securities 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.