Correlation Between Korean Drug and Hanjin Transportation
Can any of the company-specific risk be diversified away by investing in both Korean Drug and Hanjin Transportation 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 Korean Drug and Hanjin Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korean Drug Co and Hanjin Transportation Co, you can compare the effects of market volatilities on Korean Drug and Hanjin Transportation 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 Korean Drug with a short position of Hanjin Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Drug and Hanjin Transportation.
Diversification Opportunities for Korean Drug and Hanjin Transportation
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korean and Hanjin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Korean Drug Co and Hanjin Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjin Transportation and Korean Drug 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 Korean Drug Co are associated (or correlated) with Hanjin Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjin Transportation has no effect on the direction of Korean Drug i.e., Korean Drug and Hanjin Transportation go up and down completely randomly.
Pair Corralation between Korean Drug and Hanjin Transportation
Assuming the 90 days trading horizon Korean Drug Co is expected to under-perform the Hanjin Transportation. But the stock apears to be less risky and, when comparing its historical volatility, Korean Drug Co is 1.08 times less risky than Hanjin Transportation. The stock trades about -0.07 of its potential returns per unit of risk. The Hanjin Transportation Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,901,452 in Hanjin Transportation Co on September 1, 2024 and sell it today you would lose (1,452) from holding Hanjin Transportation Co or give up 0.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korean Drug Co vs. Hanjin Transportation Co
Performance |
| Timeline |
| Korean Drug |
| Hanjin Transportation |
Korean Drug and Hanjin Transportation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korean Drug and Hanjin Transportation
The main advantage of trading using opposite Korean Drug and Hanjin Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Drug position performs unexpectedly, Hanjin Transportation 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 Hanjin Transportation will offset losses from the drop in Hanjin Transportation's long position.| Korean Drug vs. Digital Power Communications | Korean Drug vs. Grand Korea Leisure | Korean Drug vs. ITM Semiconductor Co | Korean Drug vs. Shinsegae Information Communication |
| Hanjin Transportation vs. Hanwha InvestmentSecurities Co | Hanjin Transportation vs. LB Investment | Hanjin Transportation vs. DSC Investment | Hanjin Transportation vs. Coloray International 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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