Correlation Between Hankook Furniture and Korean Reinsurance
Can any of the company-specific risk be diversified away by investing in both Hankook Furniture and Korean Reinsurance 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 Hankook Furniture and Korean Reinsurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hankook Furniture Co and Korean Reinsurance Co, you can compare the effects of market volatilities on Hankook Furniture and Korean Reinsurance 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 Hankook Furniture with a short position of Korean Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankook Furniture and Korean Reinsurance.
Diversification Opportunities for Hankook Furniture and Korean Reinsurance
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hankook and Korean is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Furniture Co and Korean Reinsurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Reinsurance and Hankook Furniture 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 Hankook Furniture Co are associated (or correlated) with Korean Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Reinsurance has no effect on the direction of Hankook Furniture i.e., Hankook Furniture and Korean Reinsurance go up and down completely randomly.
Pair Corralation between Hankook Furniture and Korean Reinsurance
Assuming the 90 days trading horizon Hankook Furniture Co is expected to under-perform the Korean Reinsurance. But the stock apears to be less risky and, when comparing its historical volatility, Hankook Furniture Co is 1.22 times less risky than Korean Reinsurance. The stock trades about -0.01 of its potential returns per unit of risk. The Korean Reinsurance Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 489,667 in Korean Reinsurance Co on September 1, 2024 and sell it today you would earn a total of 321,333 from holding Korean Reinsurance Co or generate 65.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hankook Furniture Co vs. Korean Reinsurance Co
Performance |
| Timeline |
| Hankook Furniture |
| Korean Reinsurance |
Hankook Furniture and Korean Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hankook Furniture and Korean Reinsurance
The main advantage of trading using opposite Hankook Furniture and Korean Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankook Furniture position performs unexpectedly, Korean Reinsurance 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 Korean Reinsurance will offset losses from the drop in Korean Reinsurance's long position.| Hankook Furniture vs. LG Display | Hankook Furniture vs. Hyundai Motor | Hankook Furniture vs. Hyundai Motor Co | Hankook Furniture vs. Hyundai Motor Co |
| Korean Reinsurance vs. SH Energy Chemical | Korean Reinsurance vs. Namhae Chemical | Korean Reinsurance vs. JC Chemical Co | Korean Reinsurance vs. Sung Bo Chemicals |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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