Correlation Between Hankuk Steel and Home Center
Can any of the company-specific risk be diversified away by investing in both Hankuk Steel and Home Center 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 Home Center 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 Home Center Holdings, you can compare the effects of market volatilities on Hankuk Steel and Home Center 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 Home Center. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankuk Steel and Home Center.
Diversification Opportunities for Hankuk Steel and Home Center
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hankuk and Home is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hankuk Steel Wire and Home Center Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Center Holdings 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 Home Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Center Holdings has no effect on the direction of Hankuk Steel i.e., Hankuk Steel and Home Center go up and down completely randomly.
Pair Corralation between Hankuk Steel and Home Center
Assuming the 90 days trading horizon Hankuk Steel Wire is expected to generate 0.85 times more return on investment than Home Center. However, Hankuk Steel Wire is 1.18 times less risky than Home Center. It trades about -0.06 of its potential returns per unit of risk. Home Center Holdings is currently generating about -0.07 per unit of risk. If you would invest 434,248 in Hankuk Steel Wire on August 31, 2024 and sell it today you would lose (144,248) from holding Hankuk Steel Wire or give up 33.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hankuk Steel Wire vs. Home Center Holdings
Performance |
| Timeline |
| Hankuk Steel Wire |
| Home Center Holdings |
Hankuk Steel and Home Center Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hankuk Steel and Home Center
The main advantage of trading using opposite Hankuk Steel and Home Center positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankuk Steel position performs unexpectedly, Home Center 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 Home Center will offset losses from the drop in Home Center's long position.| Hankuk Steel vs. LG Chemicals | Hankuk Steel vs. POSCO Holdings | Hankuk Steel vs. Hanwha Solutions | Hankuk Steel vs. Lotte Chemical Corp |
| Home Center vs. LG Chemicals | Home Center vs. POSCO Holdings | Home Center vs. Hanwha Solutions | Home Center vs. Lotte Chemical Corp |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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