Correlation Between Han Kook and Wonil Special
Can any of the company-specific risk be diversified away by investing in both Han Kook and Wonil Special 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 Han Kook and Wonil Special into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Han Kook Steel and Wonil Special Steel, you can compare the effects of market volatilities on Han Kook and Wonil Special 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 Han Kook with a short position of Wonil Special. Check out your portfolio center. Please also check ongoing floating volatility patterns of Han Kook and Wonil Special.
Diversification Opportunities for Han Kook and Wonil Special
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Han and Wonil is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Han Kook Steel and Wonil Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonil Special Steel and Han Kook 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 Han Kook Steel are associated (or correlated) with Wonil Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonil Special Steel has no effect on the direction of Han Kook i.e., Han Kook and Wonil Special go up and down completely randomly.
Pair Corralation between Han Kook and Wonil Special
Assuming the 90 days trading horizon Han Kook Steel is expected to under-perform the Wonil Special. In addition to that, Han Kook is 2.76 times more volatile than Wonil Special Steel. It trades about -0.03 of its total potential returns per unit of risk. Wonil Special Steel is currently generating about -0.06 per unit of volatility. If you would invest 865,900 in Wonil Special Steel on September 2, 2024 and sell it today you would lose (137,900) from holding Wonil Special Steel or give up 15.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Han Kook Steel vs. Wonil Special Steel
Performance |
| Timeline |
| Han Kook Steel |
| Wonil Special Steel |
Han Kook and Wonil Special Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Han Kook and Wonil Special
The main advantage of trading using opposite Han Kook and Wonil Special positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Han Kook position performs unexpectedly, Wonil Special 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 Wonil Special will offset losses from the drop in Wonil Special's long position.The idea behind Han Kook Steel and Wonil Special Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Wonil Special vs. LG Chemicals | Wonil Special vs. POSCO Holdings | Wonil Special vs. Hanwha Solutions | Wonil Special vs. Hyundai Steel |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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