Correlation Between Namhwa Industrial and Tamul Multimedia

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

Diversification Opportunities for Namhwa Industrial and Tamul Multimedia

-0.61

Correlation Coefficient

Namhwa Industrial  Tamul Multimedia

Excellent diversification

The 3 months correlation between Namhwa and Tamul is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Namhwa Industrial Co and Tamul Multimedia Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamul Multimedia 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 Tamul Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamul Multimedia has no effect on the direction of Namhwa Industrial i.e., Namhwa Industrial and Tamul Multimedia go up and down completely randomly.

Pair Corralation between Namhwa Industrial and Tamul Multimedia

Assuming the 90 days trading horizon Namhwa Industrial Co is expected to generate 0.53 times more return on investment than Tamul Multimedia. However, Namhwa Industrial Co is 1.89 times less risky than Tamul Multimedia. It trades about 0.14 of its potential returns per unit of risk. Tamul Multimedia Co is currently generating about -0.03 per unit of risk. If you would invest  464,048  in Namhwa Industrial Co on October 15, 2024 and sell it today you would earn a total of  73,952  from holding Namhwa Industrial Co or generate 15.94% return on investment over 90 days.

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

Namhwa Industrial Co  vs.  Tamul Multimedia Co

Namhwa Industrial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namhwa Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Tamul Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tamul Multimedia 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.

Pair Trading with Namhwa Industrial and Tamul Multimedia

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

The idea behind Namhwa Industrial Co and Tamul Multimedia 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.