Correlation Between Hanwha Chemical and Gyeongnam Steel
Can any of the company-specific risk be diversified away by investing in both Hanwha Chemical and Gyeongnam 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 Hanwha Chemical and Gyeongnam Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hanwha Chemical Corp and Gyeongnam Steel Co, you can compare the effects of market volatilities on Hanwha Chemical and Gyeongnam 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 Hanwha Chemical with a short position of Gyeongnam Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanwha Chemical and Gyeongnam Steel.
Diversification Opportunities for Hanwha Chemical and Gyeongnam Steel
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hanwha and Gyeongnam is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hanwha Chemical Corp and Gyeongnam Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gyeongnam Steel and Hanwha Chemical 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 Chemical Corp are associated (or correlated) with Gyeongnam Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gyeongnam Steel has no effect on the direction of Hanwha Chemical i.e., Hanwha Chemical and Gyeongnam Steel go up and down completely randomly.
Pair Corralation between Hanwha Chemical and Gyeongnam Steel
Assuming the 90 days trading horizon Hanwha Chemical is expected to generate 3.44 times less return on investment than Gyeongnam Steel. But when comparing it to its historical volatility, Hanwha Chemical Corp is 1.98 times less risky than Gyeongnam Steel. It trades about 0.13 of its potential returns per unit of risk. Gyeongnam Steel Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 289,072 in Gyeongnam Steel Co on October 28, 2024 and sell it today you would earn a total of 259,928 from holding Gyeongnam Steel Co or generate 89.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hanwha Chemical Corp vs. Gyeongnam Steel Co
Performance |
| Timeline |
| Hanwha Chemical Corp |
| Gyeongnam Steel |
Hanwha Chemical and Gyeongnam Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanwha Chemical and Gyeongnam Steel
The main advantage of trading using opposite Hanwha Chemical and Gyeongnam Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanwha Chemical position performs unexpectedly, Gyeongnam 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 Gyeongnam Steel will offset losses from the drop in Gyeongnam Steel's long position.| Hanwha Chemical vs. Hanshin Construction Co | Hanwha Chemical vs. Dgb Financial | Hanwha Chemical vs. Shinhan Financial Group | Hanwha Chemical vs. Camus Engineering Construction |
| Gyeongnam Steel vs. Keum Kang Steel | Gyeongnam Steel vs. PJ Metal Co | Gyeongnam Steel vs. Samhyun Steel Co | Gyeongnam Steel vs. Jeil Steel Mfg |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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