Correlation Between Handok Clean and Namhwa Industrial

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

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

Diversification Opportunities for Handok Clean and Namhwa Industrial

-0.65

Correlation Coefficient

Handok Clean  Namhwa Industrial

Excellent diversification

The 3 months correlation between Handok and Namhwa is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Handok Clean Tech and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial and Handok Clean 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 Handok Clean Tech 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 Handok Clean i.e., Handok Clean and Namhwa Industrial go up and down completely randomly.

Pair Corralation between Handok Clean and Namhwa Industrial

Assuming the 90 days trading horizon Handok Clean Tech is expected to under-perform the Namhwa Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Handok Clean Tech is 1.24 times less risky than Namhwa Industrial. The stock trades about -0.07 of its potential returns per unit of risk. The Namhwa Industrial Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  465,011  in Namhwa Industrial Co on October 10, 2024 and sell it today you would earn a total of  40,989  from holding Namhwa Industrial Co or generate 8.81% return on investment over 90 days.

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

Handok Clean Tech  vs.  Namhwa Industrial Co

Handok Clean Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Handok Clean Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Handok Clean 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

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namhwa Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Handok Clean and Namhwa Industrial

The main advantage of trading using opposite Handok Clean and Namhwa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Handok Clean 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 Handok Clean Tech 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.