Correlation Between Moonbae Steel and Hankuk Steel
Can any of the company-specific risk be diversified away by investing in both Moonbae Steel 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 Moonbae Steel and Hankuk Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moonbae Steel and Hankuk Steel Wire, you can compare the effects of market volatilities on Moonbae Steel 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 Moonbae Steel with a short position of Hankuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moonbae Steel and Hankuk Steel.
Diversification Opportunities for Moonbae Steel and Hankuk Steel
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Moonbae and Hankuk is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Moonbae Steel 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 Moonbae 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 Moonbae Steel 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 Moonbae Steel i.e., Moonbae Steel and Hankuk Steel go up and down completely randomly.
Pair Corralation between Moonbae Steel and Hankuk Steel
Assuming the 90 days trading horizon Moonbae Steel is expected to generate 1.12 times more return on investment than Hankuk Steel. However, Moonbae Steel is 1.12 times more volatile than Hankuk Steel Wire. It trades about -0.02 of its potential returns per unit of risk. Hankuk Steel Wire is currently generating about -0.04 per unit of risk. If you would invest 332,478 in Moonbae Steel on August 29, 2024 and sell it today you would lose (75,478) from holding Moonbae Steel or give up 22.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Moonbae Steel vs. Hankuk Steel Wire
Performance |
| Timeline |
| Moonbae Steel |
| Hankuk Steel Wire |
Moonbae Steel and Hankuk Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moonbae Steel and Hankuk Steel
The main advantage of trading using opposite Moonbae Steel and Hankuk Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moonbae Steel 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.| Moonbae Steel vs. LG Chemicals | Moonbae Steel vs. POSCO Holdings | Moonbae Steel vs. Hanwha Solutions | Moonbae Steel vs. Lotte Chemical Corp |
| Hankuk Steel vs. Hanjoo Light Metal | Hankuk Steel vs. Automobile Pc | Hankuk Steel vs. Dongil Metal Co | Hankuk Steel vs. Dongbang Transport Logistics |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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