Correlation Between Namhwa Industrial and Samsung Biologics

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

Diversification Opportunities for Namhwa Industrial and Samsung Biologics

-0.35

Correlation Coefficient

Namhwa Industrial  Samsung Biologics

Very good diversification

The 3 months correlation between Namhwa and Samsung is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Namhwa Industrial Co and Samsung Biologics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Biologics 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 Samsung Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Biologics has no effect on the direction of Namhwa Industrial i.e., Namhwa Industrial and Samsung Biologics go up and down completely randomly.

Pair Corralation between Namhwa Industrial and Samsung Biologics

Assuming the 90 days trading horizon Namhwa Industrial Co is expected to generate 1.23 times more return on investment than Samsung Biologics. However, Namhwa Industrial is 1.23 times more volatile than Samsung Biologics Co. It trades about -0.01 of its potential returns per unit of risk. Samsung Biologics Co is currently generating about -0.08 per unit of risk. If you would invest  516,037  in Namhwa Industrial Co on October 7, 2024 and sell it today you would lose (3,037) from holding Namhwa Industrial Co or give up 0.59% of portfolio value over 90 days.

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

Namhwa Industrial Co  vs.  Samsung Biologics Co

Namhwa Industrial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namhwa Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Samsung Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Biologics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Samsung Biologics 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 Samsung Biologics

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

The idea behind Namhwa Industrial Co and Samsung Biologics 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.