Correlation Between Korea Petro and Hankuk Steel
Can any of the company-specific risk be diversified away by investing in both Korea Petro and Hankuk Steel 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 Korea Petro and Hankuk Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Petro Chemical and Hankuk Steel Wire, you can compare the effects of market volatilities on Korea Petro and Hankuk Steel 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 Korea Petro with a short position of Hankuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Petro and Hankuk Steel.
Diversification Opportunities for Korea Petro and Hankuk Steel
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Korea and Hankuk is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Korea Petro Chemical and Hankuk Steel Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankuk Steel Wire and Korea Petro 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 Korea Petro Chemical are associated (or correlated) with Hankuk Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankuk Steel Wire has no effect on the direction of Korea Petro i.e., Korea Petro and Hankuk Steel go up and down completely randomly.
Pair Corralation between Korea Petro and Hankuk Steel
Assuming the 90 days trading horizon Korea Petro Chemical is expected to under-perform the Hankuk Steel. In addition to that, Korea Petro is 1.47 times more volatile than Hankuk Steel Wire. It trades about -0.33 of its total potential returns per unit of risk. Hankuk Steel Wire is currently generating about 0.13 per unit of volatility. If you would invest 285,500 in Hankuk Steel Wire on August 30, 2024 and sell it today you would earn a total of 14,000 from holding Hankuk Steel Wire or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Petro Chemical vs. Hankuk Steel Wire
Performance |
| Timeline |
| Korea Petro Chemical |
| Hankuk Steel Wire |
Korea Petro and Hankuk Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Petro and Hankuk Steel
The main advantage of trading using opposite Korea Petro and Hankuk Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Petro position performs unexpectedly, Hankuk Steel 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 Hankuk Steel will offset losses from the drop in Hankuk Steel's long position.| Korea Petro vs. POSCO Holdings | Korea Petro vs. Hanwha Solutions | Korea Petro vs. Lotte Chemical Corp | Korea Petro vs. Hyundai Steel |
| Hankuk Steel vs. Top Material Co | Hankuk Steel vs. Iljin Materials Co | Hankuk Steel vs. INNOX Advanced Materials | Hankuk Steel vs. Digital Multimedia Technology |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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