Correlation Between Hanjin Transportation and Home Center
Can any of the company-specific risk be diversified away by investing in both Hanjin Transportation and Home Center 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 Hanjin Transportation and Home Center into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hanjin Transportation Co and Home Center Holdings, you can compare the effects of market volatilities on Hanjin Transportation and Home Center 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 Hanjin Transportation with a short position of Home Center. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanjin Transportation and Home Center.
Diversification Opportunities for Hanjin Transportation and Home Center
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hanjin and Home is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hanjin Transportation Co and Home Center Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Center Holdings and Hanjin Transportation 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 Hanjin Transportation Co are associated (or correlated) with Home Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Center Holdings has no effect on the direction of Hanjin Transportation i.e., Hanjin Transportation and Home Center go up and down completely randomly.
Pair Corralation between Hanjin Transportation and Home Center
Assuming the 90 days trading horizon Hanjin Transportation Co is expected to generate 1.04 times more return on investment than Home Center. However, Hanjin Transportation is 1.04 times more volatile than Home Center Holdings. It trades about 0.0 of its potential returns per unit of risk. Home Center Holdings is currently generating about -0.07 per unit of risk. If you would invest 1,949,232 in Hanjin Transportation Co on September 4, 2024 and sell it today you would lose (60,232) from holding Hanjin Transportation Co or give up 3.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
Hanjin Transportation Co vs. Home Center Holdings
Performance |
| Timeline |
| Hanjin Transportation |
| Home Center Holdings |
Hanjin Transportation and Home Center Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanjin Transportation and Home Center
The main advantage of trading using opposite Hanjin Transportation and Home Center positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanjin Transportation position performs unexpectedly, Home Center 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 Home Center will offset losses from the drop in Home Center's long position.The idea behind Hanjin Transportation Co and Home Center Holdings 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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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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