Correlation Between Hankuk Steel and Tongyang
Can any of the company-specific risk be diversified away by investing in both Hankuk Steel and Tongyang 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 Tongyang 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 Tongyang, you can compare the effects of market volatilities on Hankuk Steel and Tongyang 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 Tongyang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankuk Steel and Tongyang.
Diversification Opportunities for Hankuk Steel and Tongyang
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hankuk and Tongyang is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Hankuk Steel Wire and Tongyang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongyang 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 Tongyang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongyang has no effect on the direction of Hankuk Steel i.e., Hankuk Steel and Tongyang go up and down completely randomly.
Pair Corralation between Hankuk Steel and Tongyang
Assuming the 90 days trading horizon Hankuk Steel Wire is expected to generate 0.32 times more return on investment than Tongyang. However, Hankuk Steel Wire is 3.12 times less risky than Tongyang. It trades about 0.13 of its potential returns per unit of risk. Tongyang is currently generating about -0.02 per unit of risk. If you would invest 285,500 in Hankuk Steel Wire on August 30, 2024 and sell it today you would earn a total of 14,000 from holding Hankuk Steel Wire or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Hankuk Steel Wire vs. Tongyang
Performance |
| Timeline |
| Hankuk Steel Wire |
| Tongyang |
Hankuk Steel and Tongyang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hankuk Steel and Tongyang
The main advantage of trading using opposite Hankuk Steel and Tongyang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankuk Steel position performs unexpectedly, Tongyang 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 Tongyang will offset losses from the drop in Tongyang's long position.| Hankuk Steel vs. Top Material Co | Hankuk Steel vs. Iljin Materials Co | Hankuk Steel vs. INNOX Advanced Materials | Hankuk Steel vs. Digital Multimedia Technology |
| Tongyang vs. LG Household Healthcare | Tongyang vs. SK Chemicals Co | Tongyang vs. InnoTherapy | Tongyang vs. Digital Multimedia Technology |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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