Correlation Between Hwasung Industrial and Formetal
Can any of the company-specific risk be diversified away by investing in both Hwasung Industrial and Formetal 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 Hwasung Industrial and Formetal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hwasung Industrial Co and Formetal Co, you can compare the effects of market volatilities on Hwasung Industrial and Formetal 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 Hwasung Industrial with a short position of Formetal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwasung Industrial and Formetal.
Diversification Opportunities for Hwasung Industrial and Formetal
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hwasung and Formetal is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hwasung Industrial Co and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal and Hwasung 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 Hwasung Industrial Co are associated (or correlated) with Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of Hwasung Industrial i.e., Hwasung Industrial and Formetal go up and down completely randomly.
Pair Corralation between Hwasung Industrial and Formetal
Assuming the 90 days trading horizon Hwasung Industrial is expected to generate 3.69 times less return on investment than Formetal. But when comparing it to its historical volatility, Hwasung Industrial Co is 2.84 times less risky than Formetal. It trades about 0.14 of its potential returns per unit of risk. Formetal Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 311,192 in Formetal Co on October 15, 2024 and sell it today you would earn a total of 40,808 from holding Formetal Co or generate 13.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hwasung Industrial Co vs. Formetal Co
Performance |
| Timeline |
| Hwasung Industrial |
| Formetal |
Hwasung Industrial and Formetal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hwasung Industrial and Formetal
The main advantage of trading using opposite Hwasung Industrial and Formetal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hwasung Industrial position performs unexpectedly, Formetal 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 Formetal will offset losses from the drop in Formetal's long position.| Hwasung Industrial vs. Songwon Industrial Co | Hwasung Industrial vs. ABOV Semiconductor Co | Hwasung Industrial vs. Handok Clean Tech | Hwasung Industrial vs. Cheryong Industrial CoLtd |
| Formetal vs. Dongil Metal Co | Formetal vs. Cheryong Industrial CoLtd | Formetal vs. Industrial Bank | Formetal vs. Hyundai Industrial Co |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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