Correlation Between Lee Ku and Hannong Chemicals
Can any of the company-specific risk be diversified away by investing in both Lee Ku and Hannong Chemicals 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 Lee Ku and Hannong Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lee Ku Industrial and Hannong Chemicals, you can compare the effects of market volatilities on Lee Ku and Hannong Chemicals 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 Lee Ku with a short position of Hannong Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lee Ku and Hannong Chemicals.
Diversification Opportunities for Lee Ku and Hannong Chemicals
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lee and Hannong is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lee Ku Industrial and Hannong Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannong Chemicals and Lee Ku 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 Lee Ku Industrial are associated (or correlated) with Hannong Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannong Chemicals has no effect on the direction of Lee Ku i.e., Lee Ku and Hannong Chemicals go up and down completely randomly.
Pair Corralation between Lee Ku and Hannong Chemicals
Assuming the 90 days trading horizon Lee Ku is expected to generate 1.46 times less return on investment than Hannong Chemicals. But when comparing it to its historical volatility, Lee Ku Industrial is 1.49 times less risky than Hannong Chemicals. It trades about 0.13 of its potential returns per unit of risk. Hannong Chemicals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,313,000 in Hannong Chemicals on November 1, 2024 and sell it today you would earn a total of 85,000 from holding Hannong Chemicals or generate 6.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lee Ku Industrial vs. Hannong Chemicals
Performance |
| Timeline |
| Lee Ku Industrial |
| Hannong Chemicals |
Lee Ku and Hannong Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lee Ku and Hannong Chemicals
The main advantage of trading using opposite Lee Ku and Hannong Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lee Ku position performs unexpectedly, Hannong Chemicals 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 Hannong Chemicals will offset losses from the drop in Hannong Chemicals' long position.| Lee Ku vs. Jeju Air Co | Lee Ku vs. PJ Metal Co | Lee Ku vs. Guyoung Technology Co | Lee Ku vs. Duksan Hi Metal |
| Hannong Chemicals vs. Hyundai Engineering Plastics | Hannong Chemicals vs. Nable Communications | Hannong Chemicals vs. Inzi Display CoLtd | Hannong Chemicals vs. Digital Power Communications |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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