Correlation Between KG Eco and Namhwa Industrial

Can any of the company-specific risk be diversified away by investing in both KG Eco and Namhwa Industrial 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 KG Eco and Namhwa Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KG Eco Technology and Namhwa Industrial Co, you can compare the effects of market volatilities on KG Eco and Namhwa Industrial 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 KG Eco with a short position of Namhwa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of KG Eco and Namhwa Industrial.

Diversification Opportunities for KG Eco and Namhwa Industrial

-0.38

Correlation Coefficient

KG Eco  Namhwa Industrial

Very good diversification

The 3 months correlation between 151860 and Namhwa is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding KG Eco Technology and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial and KG Eco 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 KG Eco Technology are associated (or correlated) with Namhwa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhwa Industrial has no effect on the direction of KG Eco i.e., KG Eco and Namhwa Industrial go up and down completely randomly.

Pair Corralation between KG Eco and Namhwa Industrial

Assuming the 90 days trading horizon KG Eco Technology is expected to under-perform the Namhwa Industrial. In addition to that, KG Eco is 2.77 times more volatile than Namhwa Industrial Co. It trades about -0.02 of its total potential returns per unit of risk. Namhwa Industrial Co is currently generating about -0.05 per unit of volatility. If you would invest  782,549  in Namhwa Industrial Co on October 12, 2024 and sell it today you would lose (253,549) from holding Namhwa Industrial Co or give up 32.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

KG Eco Technology  vs.  Namhwa Industrial Co

KG Eco Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KG Eco Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KG Eco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Namhwa Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 8 (%) 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.

Pair Trading with KG Eco and Namhwa Industrial

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

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