Correlation Between Korea Steel and Hanwha Chemical
Can any of the company-specific risk be diversified away by investing in both Korea Steel and Hanwha Chemical 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 Steel and Hanwha Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Steel Co and Hanwha Chemical Corp, you can compare the effects of market volatilities on Korea Steel and Hanwha Chemical 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 Steel with a short position of Hanwha Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Steel and Hanwha Chemical.
Diversification Opportunities for Korea Steel and Hanwha Chemical
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Korea and Hanwha is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co and Hanwha Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Chemical Corp and Korea Steel 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 Steel Co are associated (or correlated) with Hanwha Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Chemical Corp has no effect on the direction of Korea Steel i.e., Korea Steel and Hanwha Chemical go up and down completely randomly.
Pair Corralation between Korea Steel and Hanwha Chemical
Assuming the 90 days trading horizon Korea Steel Co is expected to under-perform the Hanwha Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Korea Steel Co is 5.29 times less risky than Hanwha Chemical. The stock trades about -0.19 of its potential returns per unit of risk. The Hanwha Chemical Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,794,000 in Hanwha Chemical Corp on November 7, 2024 and sell it today you would earn a total of 206,000 from holding Hanwha Chemical Corp or generate 11.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 84.21% |
| Values | Daily Returns |
Korea Steel Co vs. Hanwha Chemical Corp
Performance |
| Timeline |
| Korea Steel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Hanwha Chemical Corp |
Korea Steel and Hanwha Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Steel and Hanwha Chemical
The main advantage of trading using opposite Korea Steel and Hanwha Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Steel position performs unexpectedly, Hanwha Chemical 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 Hanwha Chemical will offset losses from the drop in Hanwha Chemical's long position.| Korea Steel vs. Hansol Chemical Co | Korea Steel vs. Aekyung Petrochemical Co | Korea Steel vs. Dongnam Chemical Co | Korea Steel vs. Hanil Chemical Ind |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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