Correlation Between Narae Nanotech and NH Investment

Can any of the company-specific risk be diversified away by investing in both Narae Nanotech and NH Investment 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 Narae Nanotech and NH Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Narae Nanotech Corp and NH Investment Securities, you can compare the effects of market volatilities on Narae Nanotech and NH Investment 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 Narae Nanotech with a short position of NH Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Narae Nanotech and NH Investment.

Diversification Opportunities for Narae Nanotech and NH Investment

0.55

Correlation Coefficient

Narae Nanotech  NH Investment

Very weak diversification

The 3 months correlation between Narae and 005940 is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Narae Nanotech Corp and NH Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Investment Securities and Narae Nanotech 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 Narae Nanotech Corp are associated (or correlated) with NH Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Investment Securities has no effect on the direction of Narae Nanotech i.e., Narae Nanotech and NH Investment go up and down completely randomly.

Pair Corralation between Narae Nanotech and NH Investment

Assuming the 90 days trading horizon Narae Nanotech Corp is expected to generate 2.46 times more return on investment than NH Investment. However, Narae Nanotech is 2.46 times more volatile than NH Investment Securities. It trades about 0.05 of its potential returns per unit of risk. NH Investment Securities is currently generating about 0.02 per unit of risk. If you would invest  383,000  in Narae Nanotech Corp on October 3, 2024 and sell it today you would earn a total of  26,000  from holding Narae Nanotech Corp or generate 6.79% return on investment over 90 days.

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

Narae Nanotech Corp  vs.  NH Investment Securities

Narae Nanotech Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Narae Nanotech Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Narae Nanotech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NH Investment Securities

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NH Investment Securities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NH Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Narae Nanotech and NH Investment

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

The idea behind Narae Nanotech Corp and NH Investment Securities 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.