Correlation Between Hankook Steel and Songwon Industrial
Can any of the company-specific risk be diversified away by investing in both Hankook Steel and Songwon Industrial 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 Hankook Steel and Songwon Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hankook Steel Co and Songwon Industrial Co, you can compare the effects of market volatilities on Hankook Steel and Songwon Industrial 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 Hankook Steel with a short position of Songwon Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankook Steel and Songwon Industrial.
Diversification Opportunities for Hankook Steel and Songwon Industrial
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Hankook and Songwon is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Steel Co and Songwon Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Songwon Industrial and Hankook 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 Hankook Steel Co are associated (or correlated) with Songwon Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Songwon Industrial has no effect on the direction of Hankook Steel i.e., Hankook Steel and Songwon Industrial go up and down completely randomly.
Pair Corralation between Hankook Steel and Songwon Industrial
Assuming the 90 days trading horizon Hankook Steel Co is expected to under-perform the Songwon Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Hankook Steel Co is 1.78 times less risky than Songwon Industrial. The stock trades about -0.12 of its potential returns per unit of risk. The Songwon Industrial Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,116,000 in Songwon Industrial Co on October 25, 2024 and sell it today you would earn a total of 132,000 from holding Songwon Industrial Co or generate 11.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hankook Steel Co vs. Songwon Industrial Co
Performance |
| Timeline |
| Hankook Steel |
| Songwon Industrial |
Hankook Steel and Songwon Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hankook Steel and Songwon Industrial
The main advantage of trading using opposite Hankook Steel and Songwon Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankook Steel position performs unexpectedly, Songwon Industrial 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 Songwon Industrial will offset losses from the drop in Songwon Industrial's long position.| Hankook Steel vs. KB Financial Group | Hankook Steel vs. Shinhan Financial Group | Hankook Steel vs. Hana Financial | Hankook Steel vs. Woori Financial Group |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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