Correlation Between Hanwha Solutions and MSC

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Can any of the company-specific risk be diversified away by investing in both Hanwha Solutions and MSC 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 Hanwha Solutions and MSC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hanwha Solutions and MSC Co, you can compare the effects of market volatilities on Hanwha Solutions and MSC 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 Hanwha Solutions with a short position of MSC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanwha Solutions and MSC.

Diversification Opportunities for Hanwha Solutions and MSC

-0.53
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Hanwha and MSC is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hanwha Solutions and MSC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSC Co and Hanwha Solutions 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 Hanwha Solutions are associated (or correlated) with MSC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSC Co has no effect on the direction of Hanwha Solutions i.e., Hanwha Solutions and MSC go up and down completely randomly.

Pair Corralation between Hanwha Solutions and MSC

Assuming the 90 days trading horizon Hanwha Solutions is expected to under-perform the MSC. But the stock apears to be less risky and, when comparing its historical volatility, Hanwha Solutions is 1.18 times less risky than MSC. The stock trades about -0.14 of its potential returns per unit of risk. The MSC Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  529,000  in MSC Co on September 1, 2024 and sell it today you would earn a total of  27,000  from holding MSC Co or generate 5.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.19%
ValuesDaily Returns

Hanwha Solutions  vs.  MSC Co

 Performance 
       Timeline  
Hanwha Solutions 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hanwha Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
MSC Co 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in MSC Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MSC sustained solid returns over the last few months and may actually be approaching a breakup point.

Hanwha Solutions and MSC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hanwha Solutions and MSC

The main advantage of trading using opposite Hanwha Solutions and MSC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanwha Solutions position performs unexpectedly, MSC 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 MSC will offset losses from the drop in MSC's long position.
The idea behind Hanwha Solutions and MSC Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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