Correlation Between Hwangkum Steel and Hannong Chemicals

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Can any of the company-specific risk be diversified away by investing in both Hwangkum Steel 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 Hwangkum Steel and Hannong Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hwangkum Steel Technology and Hannong Chemicals, you can compare the effects of market volatilities on Hwangkum Steel 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 Hwangkum Steel with a short position of Hannong Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwangkum Steel and Hannong Chemicals.

Diversification Opportunities for Hwangkum Steel and Hannong Chemicals

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Hwangkum and Hannong is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Hwangkum Steel Technology and Hannong Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannong Chemicals and Hwangkum 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 Hwangkum Steel Technology 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 Hwangkum Steel i.e., Hwangkum Steel and Hannong Chemicals go up and down completely randomly.

Pair Corralation between Hwangkum Steel and Hannong Chemicals

Assuming the 90 days trading horizon Hwangkum Steel Technology is expected to under-perform the Hannong Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Hwangkum Steel Technology is 2.78 times less risky than Hannong Chemicals. The stock trades about -0.03 of its potential returns per unit of risk. The Hannong Chemicals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,066,899  in Hannong Chemicals on October 12, 2024 and sell it today you would earn a total of  398,101  from holding Hannong Chemicals or generate 37.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Hwangkum Steel Technology  vs.  Hannong Chemicals

 Performance 
       Timeline  
Hwangkum Steel Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hwangkum Steel Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hwangkum Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Hannong Chemicals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hannong Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hwangkum Steel and Hannong Chemicals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hwangkum Steel and Hannong Chemicals

The main advantage of trading using opposite Hwangkum Steel and Hannong Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hwangkum Steel 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.
The idea behind Hwangkum Steel Technology and Hannong Chemicals 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.
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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