Correlation Between Hankuk Steel and Namyang Dairy
Can any of the company-specific risk be diversified away by investing in both Hankuk Steel and Namyang Dairy 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 Namyang Dairy 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 Namyang Dairy, you can compare the effects of market volatilities on Hankuk Steel and Namyang Dairy 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 Namyang Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankuk Steel and Namyang Dairy.
Diversification Opportunities for Hankuk Steel and Namyang Dairy
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hankuk and Namyang is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Hankuk Steel Wire and Namyang Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namyang Dairy 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 Namyang Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namyang Dairy has no effect on the direction of Hankuk Steel i.e., Hankuk Steel and Namyang Dairy go up and down completely randomly.
Pair Corralation between Hankuk Steel and Namyang Dairy
Assuming the 90 days trading horizon Hankuk Steel Wire is expected to generate 2.84 times more return on investment than Namyang Dairy. However, Hankuk Steel is 2.84 times more volatile than Namyang Dairy. It trades about 0.02 of its potential returns per unit of risk. Namyang Dairy is currently generating about -0.09 per unit of risk. If you would invest 409,000 in Hankuk Steel Wire on October 12, 2024 and sell it today you would lose (2,000) from holding Hankuk Steel Wire or give up 0.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hankuk Steel Wire vs. Namyang Dairy
Performance |
| Timeline |
| Hankuk Steel Wire |
| Namyang Dairy |
Hankuk Steel and Namyang Dairy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hankuk Steel and Namyang Dairy
The main advantage of trading using opposite Hankuk Steel and Namyang Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankuk Steel position performs unexpectedly, Namyang Dairy 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 Namyang Dairy will offset losses from the drop in Namyang Dairy's long position.| Hankuk Steel vs. ENF Technology Co | Hankuk Steel vs. Guyoung Technology Co | Hankuk Steel vs. NewFlex Technology Co | Hankuk Steel vs. Daelim Trading Co |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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