Correlation Between Namhwa Industrial and Polaris Office

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

By analyzing existing cross correlation between Namhwa Industrial Co and Polaris Office Corp, you can compare the effects of market volatilities on Namhwa Industrial and Polaris Office 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 Namhwa Industrial with a short position of Polaris Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namhwa Industrial and Polaris Office.

Diversification Opportunities for Namhwa Industrial and Polaris Office

-0.23

Correlation Coefficient

Namhwa Industrial  Polaris Office

Very good diversification

The 3 months correlation between Namhwa and Polaris is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Namhwa Industrial Co and Polaris Office Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Office Corp and Namhwa Industrial 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 Namhwa Industrial Co are associated (or correlated) with Polaris Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Office Corp has no effect on the direction of Namhwa Industrial i.e., Namhwa Industrial and Polaris Office go up and down completely randomly.

Pair Corralation between Namhwa Industrial and Polaris Office

Assuming the 90 days trading horizon Namhwa Industrial Co is expected to generate 0.47 times more return on investment than Polaris Office. However, Namhwa Industrial Co is 2.13 times less risky than Polaris Office. It trades about 0.02 of its potential returns per unit of risk. Polaris Office Corp is currently generating about -0.01 per unit of risk. If you would invest  500,633  in Namhwa Industrial Co on December 1, 2024 and sell it today you would earn a total of  3,367  from holding Namhwa Industrial Co or generate 0.67% return on investment over 90 days.

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

Namhwa Industrial Co  vs.  Polaris Office Corp

Namhwa Industrial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Namhwa Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Polaris Office Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Namhwa Industrial and Polaris Office

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

The idea behind Namhwa Industrial Co and Polaris Office Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.