Correlation Between Namhwa Industrial and Coloray International

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

Diversification Opportunities for Namhwa Industrial and Coloray International

0.15

Correlation Coefficient

Namhwa Industrial  Coloray International

Average diversification

The 3 months correlation between Namhwa and Coloray is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Namhwa Industrial Co and Coloray International Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloray International 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 Coloray International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloray International has no effect on the direction of Namhwa Industrial i.e., Namhwa Industrial and Coloray International go up and down completely randomly.

Pair Corralation between Namhwa Industrial and Coloray International

Assuming the 90 days trading horizon Namhwa Industrial is expected to generate 69.06 times less return on investment than Coloray International. But when comparing it to its historical volatility, Namhwa Industrial Co is 1.69 times less risky than Coloray International. It trades about 0.01 of its potential returns per unit of risk. Coloray International Investment is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  59,000  in Coloray International Investment on December 4, 2024 and sell it today you would earn a total of  27,400  from holding Coloray International Investment or generate 46.44% return on investment over 90 days.

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

Namhwa Industrial Co  vs.  Coloray International Investme

Namhwa Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Namhwa Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Coloray International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coloray International Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Coloray International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Namhwa Industrial and Coloray International

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

The idea behind Namhwa Industrial Co and Coloray International Investment 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.