Correlation Between Automobile and Hankuk Steel
Can any of the company-specific risk be diversified away by investing in both Automobile 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 Automobile and Hankuk Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automobile Pc and Hankuk Steel Wire, you can compare the effects of market volatilities on Automobile 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 Automobile with a short position of Hankuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automobile and Hankuk Steel.
Diversification Opportunities for Automobile and Hankuk Steel
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Automobile and Hankuk is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc 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 Automobile 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 Automobile Pc 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 Automobile i.e., Automobile and Hankuk Steel go up and down completely randomly.
Pair Corralation between Automobile and Hankuk Steel
Assuming the 90 days trading horizon Automobile is expected to generate 1.97 times less return on investment than Hankuk Steel. In addition to that, Automobile is 2.56 times more volatile than Hankuk Steel Wire. It trades about 0.04 of its total potential returns per unit of risk. Hankuk Steel Wire is currently generating about 0.18 per unit of volatility. If you would invest 281,000 in Hankuk Steel Wire on August 29, 2024 and sell it today you would earn a total of 19,000 from holding Hankuk Steel Wire or generate 6.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automobile Pc vs. Hankuk Steel Wire
Performance |
| Timeline |
| Automobile Pc |
| Hankuk Steel Wire |
Automobile and Hankuk Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automobile and Hankuk Steel
The main advantage of trading using opposite Automobile and Hankuk Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automobile 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.| Automobile vs. Hanwha InvestmentSecurities Co | Automobile vs. Sangsin Energy Display | Automobile vs. Atinum Investment Co | Automobile vs. LB Investment |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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