Correlation Between Hankuk Steel and Kia Corp
Can any of the company-specific risk be diversified away by investing in both Hankuk Steel and Kia Corp 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 Hankuk Steel and Kia Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hankuk Steel Wire and Kia Corp, you can compare the effects of market volatilities on Hankuk Steel and Kia Corp 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 Hankuk Steel with a short position of Kia Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankuk Steel and Kia Corp.
Diversification Opportunities for Hankuk Steel and Kia Corp
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hankuk and Kia is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hankuk Steel Wire and Kia Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kia Corp and Hankuk 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 Hankuk Steel Wire are associated (or correlated) with Kia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kia Corp has no effect on the direction of Hankuk Steel i.e., Hankuk Steel and Kia Corp go up and down completely randomly.
Pair Corralation between Hankuk Steel and Kia Corp
Assuming the 90 days trading horizon Hankuk Steel Wire is expected to under-perform the Kia Corp. But the stock apears to be less risky and, when comparing its historical volatility, Hankuk Steel Wire is 1.3 times less risky than Kia Corp. The stock trades about -0.08 of its potential returns per unit of risk. The Kia Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 10,850,000 in Kia Corp on September 3, 2024 and sell it today you would lose (1,560,000) from holding Kia Corp or give up 14.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hankuk Steel Wire vs. Kia Corp
Performance |
| Timeline |
| Hankuk Steel Wire |
| Kia Corp |
Hankuk Steel and Kia Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hankuk Steel and Kia Corp
The main advantage of trading using opposite Hankuk Steel and Kia Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankuk Steel position performs unexpectedly, Kia Corp 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 Kia Corp will offset losses from the drop in Kia Corp's long position.| Hankuk Steel vs. Youngbo Chemical Co | Hankuk Steel vs. Daelim Industrial Co | Hankuk Steel vs. Kumho Industrial Co | Hankuk Steel vs. Pungguk Ethanol Industrial |
| Kia Corp vs. CJ Seafood Corp | Kia Corp vs. Youl Chon Chemical | Kia Corp vs. Miwon Chemical | Kia Corp vs. FOODWELL Co |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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