Correlation Between Nam Hwa and Sewoon Medical

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Can any of the company-specific risk be diversified away by investing in both Nam Hwa and Sewoon Medical 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 Nam Hwa and Sewoon Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nam Hwa Construction and Sewoon Medical Co, you can compare the effects of market volatilities on Nam Hwa and Sewoon Medical 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 Nam Hwa with a short position of Sewoon Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Hwa and Sewoon Medical.

Diversification Opportunities for Nam Hwa and Sewoon Medical

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between Nam and Sewoon is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nam Hwa Construction and Sewoon Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sewoon Medical and Nam Hwa 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 Nam Hwa Construction are associated (or correlated) with Sewoon Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sewoon Medical has no effect on the direction of Nam Hwa i.e., Nam Hwa and Sewoon Medical go up and down completely randomly.

Pair Corralation between Nam Hwa and Sewoon Medical

Assuming the 90 days trading horizon Nam Hwa is expected to generate 4.65 times less return on investment than Sewoon Medical. In addition to that, Nam Hwa is 1.13 times more volatile than Sewoon Medical Co. It trades about 0.07 of its total potential returns per unit of risk. Sewoon Medical Co is currently generating about 0.37 per unit of volatility. If you would invest  220,133  in Sewoon Medical Co on October 8, 2024 and sell it today you would earn a total of  28,867  from holding Sewoon Medical Co or generate 13.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Nam Hwa Construction  vs.  Sewoon Medical Co

 Performance 
       Timeline  
Nam Hwa Construction 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sewoon Medical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nam Hwa and Sewoon Medical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nam Hwa and Sewoon Medical

The main advantage of trading using opposite Nam Hwa and Sewoon Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nam Hwa position performs unexpectedly, Sewoon Medical 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 Sewoon Medical will offset losses from the drop in Sewoon Medical's long position.
The idea behind Nam Hwa Construction and Sewoon Medical 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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