Correlation Between Namhwa Industrial and Daishin Balance

Can any of the company-specific risk be diversified away by investing in both Namhwa Industrial and Daishin Balance 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 Daishin Balance 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 Daishin Balance No, you can compare the effects of market volatilities on Namhwa Industrial and Daishin Balance 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 Daishin Balance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namhwa Industrial and Daishin Balance.

Diversification Opportunities for Namhwa Industrial and Daishin Balance

0.48

Correlation Coefficient

Namhwa Industrial  Daishin Balance

Very weak diversification

The 3 months correlation between Namhwa and Daishin is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Namhwa Industrial Co and Daishin Balance No in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daishin Balance No 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 Daishin Balance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daishin Balance No has no effect on the direction of Namhwa Industrial i.e., Namhwa Industrial and Daishin Balance go up and down completely randomly.

Pair Corralation between Namhwa Industrial and Daishin Balance

Assuming the 90 days trading horizon Namhwa Industrial is expected to generate 2.52 times less return on investment than Daishin Balance. But when comparing it to its historical volatility, Namhwa Industrial Co is 1.1 times less risky than Daishin Balance. It trades about 0.02 of its potential returns per unit of risk. Daishin Balance No is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  98,100  in Daishin Balance No on December 2, 2024 and sell it today you would earn a total of  3,100  from holding Daishin Balance No or generate 3.16% return on investment over 90 days.

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

Namhwa Industrial Co  vs.  Daishin Balance No

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.

Daishin Balance No

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daishin Balance No are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daishin Balance 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 Daishin Balance

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

The idea behind Namhwa Industrial Co and Daishin Balance No 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.