Correlation Between Dong A and Namhwa Industrial
Can any of the company-specific risk be diversified away by investing in both Dong A 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 Dong A and Namhwa Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dong A Eltek and Namhwa Industrial Co, you can compare the effects of market volatilities on Dong A 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 Dong A with a short position of Namhwa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong A and Namhwa Industrial.
Diversification Opportunities for Dong A and Namhwa Industrial
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dong and Namhwa is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Eltek and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial and Dong A 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 Dong A Eltek 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 Dong A i.e., Dong A and Namhwa Industrial go up and down completely randomly.
Pair Corralation between Dong A and Namhwa Industrial
Assuming the 90 days trading horizon Dong A Eltek is expected to under-perform the Namhwa Industrial. In addition to that, Dong A is 1.91 times more volatile than Namhwa Industrial Co. It trades about -0.15 of its total potential returns per unit of risk. Namhwa Industrial Co is currently generating about 0.11 per unit of volatility. If you would invest 478,000 in Namhwa Industrial Co on September 23, 2024 and sell it today you would earn a total of 55,000 from holding Namhwa Industrial Co or generate 11.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Dong A Eltek vs. Namhwa Industrial Co
Performance |
Timeline |
Dong A Eltek |
Namhwa Industrial |
Dong A and Namhwa Industrial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dong A and Namhwa Industrial
The main advantage of trading using opposite Dong A and Namhwa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong A 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.Dong A vs. Dongsin Engineering Construction | ||
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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