Correlation Between Hankook Furniture and KMH Hitech
Can any of the company-specific risk be diversified away by investing in both Hankook Furniture and KMH Hitech 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 KMH Hitech 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 KMH Hitech Co, you can compare the effects of market volatilities on Hankook Furniture and KMH Hitech 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 KMH Hitech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankook Furniture and KMH Hitech.
Diversification Opportunities for Hankook Furniture and KMH Hitech
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hankook and KMH is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Furniture Co and KMH Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMH Hitech 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 KMH Hitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMH Hitech has no effect on the direction of Hankook Furniture i.e., Hankook Furniture and KMH Hitech go up and down completely randomly.
Pair Corralation between Hankook Furniture and KMH Hitech
Assuming the 90 days trading horizon Hankook Furniture is expected to generate 1.24 times less return on investment than KMH Hitech. In addition to that, Hankook Furniture is 1.36 times more volatile than KMH Hitech Co. It trades about 0.08 of its total potential returns per unit of risk. KMH Hitech Co is currently generating about 0.14 per unit of volatility. If you would invest 98,000 in KMH Hitech Co on November 27, 2024 and sell it today you would earn a total of 3,600 from holding KMH Hitech Co or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hankook Furniture Co vs. KMH Hitech Co
Performance |
| Timeline |
| Hankook Furniture |
| KMH Hitech |
Hankook Furniture and KMH Hitech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hankook Furniture and KMH Hitech
The main advantage of trading using opposite Hankook Furniture and KMH Hitech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankook Furniture position performs unexpectedly, KMH Hitech 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 KMH Hitech will offset losses from the drop in KMH Hitech's long position.| Hankook Furniture vs. Husteel | Hankook Furniture vs. Insun Environment New | Hankook Furniture vs. Nable Communications | Hankook Furniture vs. Hironic Co |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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