Correlation Between Nam Hwa and WooDeumGee Farm

Can any of the company-specific risk be diversified away by investing in both Nam Hwa and WooDeumGee Farm 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 WooDeumGee Farm 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 WooDeumGee Farm Co,, you can compare the effects of market volatilities on Nam Hwa and WooDeumGee Farm 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 WooDeumGee Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Hwa and WooDeumGee Farm.

Diversification Opportunities for Nam Hwa and WooDeumGee Farm

-0.18

Correlation Coefficient

Nam Hwa  WooDeumGee Farm

Good diversification

The 3 months correlation between Nam and WooDeumGee is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nam Hwa Construction and WooDeumGee Farm Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WooDeumGee Farm Co, 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 WooDeumGee Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WooDeumGee Farm Co, has no effect on the direction of Nam Hwa i.e., Nam Hwa and WooDeumGee Farm go up and down completely randomly.

Pair Corralation between Nam Hwa and WooDeumGee Farm

Assuming the 90 days trading horizon Nam Hwa Construction is expected to generate 1.4 times more return on investment than WooDeumGee Farm. However, Nam Hwa is 1.4 times more volatile than WooDeumGee Farm Co,. It trades about 0.06 of its potential returns per unit of risk. WooDeumGee Farm Co, is currently generating about -0.14 per unit of risk. If you would invest  402,000  in Nam Hwa Construction on September 22, 2024 and sell it today you would earn a total of  33,000  from holding Nam Hwa Construction or generate 8.21% return on investment over 90 days.

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

Nam Hwa Construction  vs.  WooDeumGee Farm Co,

Nam Hwa Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nam Hwa Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nam Hwa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WooDeumGee Farm Co,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WooDeumGee Farm Co, 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.

Pair Trading with Nam Hwa and WooDeumGee Farm

The main advantage of trading using opposite Nam Hwa and WooDeumGee Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nam Hwa position performs unexpectedly, WooDeumGee Farm 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 WooDeumGee Farm will offset losses from the drop in WooDeumGee Farm's long position.

The idea behind Nam Hwa Construction and WooDeumGee Farm 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.