Correlation Between Hankook Furniture and Derkwoo Electronics
Can any of the company-specific risk be diversified away by investing in both Hankook Furniture and Derkwoo Electronics 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 Derkwoo Electronics 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 Derkwoo Electronics Co, you can compare the effects of market volatilities on Hankook Furniture and Derkwoo Electronics 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 Derkwoo Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankook Furniture and Derkwoo Electronics.
Diversification Opportunities for Hankook Furniture and Derkwoo Electronics
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Hankook and Derkwoo is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Furniture Co and Derkwoo Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derkwoo Electronics 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 Derkwoo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derkwoo Electronics has no effect on the direction of Hankook Furniture i.e., Hankook Furniture and Derkwoo Electronics go up and down completely randomly.
Pair Corralation between Hankook Furniture and Derkwoo Electronics
Assuming the 90 days trading horizon Hankook Furniture is expected to generate 12.39 times less return on investment than Derkwoo Electronics. But when comparing it to its historical volatility, Hankook Furniture Co is 1.61 times less risky than Derkwoo Electronics. It trades about 0.02 of its potential returns per unit of risk. Derkwoo Electronics Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 492,000 in Derkwoo Electronics Co on October 13, 2024 and sell it today you would earn a total of 23,000 from holding Derkwoo Electronics Co or generate 4.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hankook Furniture Co vs. Derkwoo Electronics Co
Performance |
| Timeline |
| Hankook Furniture |
| Derkwoo Electronics |
Hankook Furniture and Derkwoo Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hankook Furniture and Derkwoo Electronics
The main advantage of trading using opposite Hankook Furniture and Derkwoo Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankook Furniture position performs unexpectedly, Derkwoo Electronics 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 Derkwoo Electronics will offset losses from the drop in Derkwoo Electronics' long position.| Hankook Furniture vs. Jeju Bank | Hankook Furniture vs. Dong A Steel Technology | Hankook Furniture vs. Digital Imaging Technology | Hankook Furniture vs. Industrial Bank |
| Derkwoo Electronics vs. PJ Metal Co | Derkwoo Electronics vs. Mobile Appliance | Derkwoo Electronics vs. Nice Information Telecommunication | Derkwoo Electronics vs. Lotte Data Communication |
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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