Correlation Between Hankook Furniture and Hwaseung Industries
Can any of the company-specific risk be diversified away by investing in both Hankook Furniture and Hwaseung Industries 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 Hwaseung Industries 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 Hwaseung Industries Co, you can compare the effects of market volatilities on Hankook Furniture and Hwaseung Industries 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 Hwaseung Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankook Furniture and Hwaseung Industries.
Diversification Opportunities for Hankook Furniture and Hwaseung Industries
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hankook and Hwaseung is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Furniture Co and Hwaseung Industries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwaseung Industries 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 Hwaseung Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwaseung Industries has no effect on the direction of Hankook Furniture i.e., Hankook Furniture and Hwaseung Industries go up and down completely randomly.
Pair Corralation between Hankook Furniture and Hwaseung Industries
Assuming the 90 days trading horizon Hankook Furniture Co is expected to under-perform the Hwaseung Industries. But the stock apears to be less risky and, when comparing its historical volatility, Hankook Furniture Co is 1.45 times less risky than Hwaseung Industries. The stock trades about -0.01 of its potential returns per unit of risk. The Hwaseung Industries Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 414,500 in Hwaseung Industries Co on September 3, 2024 and sell it today you would earn a total of 1,500 from holding Hwaseung Industries Co or generate 0.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hankook Furniture Co vs. Hwaseung Industries Co
Performance |
| Timeline |
| Hankook Furniture |
| Hwaseung Industries |
Hankook Furniture and Hwaseung Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hankook Furniture and Hwaseung Industries
The main advantage of trading using opposite Hankook Furniture and Hwaseung Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankook Furniture position performs unexpectedly, Hwaseung Industries 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 Hwaseung Industries will offset losses from the drop in Hwaseung Industries' long position.| Hankook Furniture vs. Korea Real Estate | Hankook Furniture vs. Busan Industrial Co | Hankook Furniture vs. UNISEM Co | Hankook Furniture vs. RPBio Inc |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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