Correlation Between Namhwa Industrial and TSI

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

Diversification Opportunities for Namhwa Industrial and TSI

-0.36

Correlation Coefficient

Namhwa Industrial  TSI

Very good diversification

The 3 months correlation between Namhwa and TSI is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Namhwa Industrial Co and TSI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TSI Co 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 TSI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TSI Co has no effect on the direction of Namhwa Industrial i.e., Namhwa Industrial and TSI go up and down completely randomly.

Pair Corralation between Namhwa Industrial and TSI

Assuming the 90 days trading horizon Namhwa Industrial Co is expected to generate 0.48 times more return on investment than TSI. However, Namhwa Industrial Co is 2.07 times less risky than TSI. It trades about 0.07 of its potential returns per unit of risk. TSI Co is currently generating about -0.04 per unit of risk. If you would invest  476,083  in Namhwa Industrial Co on October 22, 2024 and sell it today you would earn a total of  60,917  from holding Namhwa Industrial Co or generate 12.8% 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.  TSI Co

Namhwa Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 9 (%) 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.

TSI Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TSI 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 TSI

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

The idea behind Namhwa Industrial Co and TSI 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.