Correlation Between BYON and Hankuk Steel
Can any of the company-specific risk be diversified away by investing in both BYON and Hankuk Steel 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 BYON and Hankuk Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYON Co and Hankuk Steel Wire, you can compare the effects of market volatilities on BYON and Hankuk Steel 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 BYON with a short position of Hankuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYON and Hankuk Steel.
Diversification Opportunities for BYON and Hankuk Steel
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between BYON and Hankuk is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding BYON Co and Hankuk Steel Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankuk Steel Wire and BYON 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 BYON Co are associated (or correlated) with Hankuk Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankuk Steel Wire has no effect on the direction of BYON i.e., BYON and Hankuk Steel go up and down completely randomly.
Pair Corralation between BYON and Hankuk Steel
Assuming the 90 days trading horizon BYON Co is expected to under-perform the Hankuk Steel. But the stock apears to be less risky and, when comparing its historical volatility, BYON Co is 1.01 times less risky than Hankuk Steel. The stock trades about -0.06 of its potential returns per unit of risk. The Hankuk Steel Wire is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 281,500 in Hankuk Steel Wire on September 18, 2024 and sell it today you would earn a total of 162,500 from holding Hankuk Steel Wire or generate 57.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
BYON Co vs. Hankuk Steel Wire
Performance |
| Timeline |
| BYON |
| Hankuk Steel Wire |
BYON and Hankuk Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYON and Hankuk Steel
The main advantage of trading using opposite BYON and Hankuk Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYON position performs unexpectedly, Hankuk Steel 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 Hankuk Steel will offset losses from the drop in Hankuk Steel's long position.The idea behind BYON Co and Hankuk Steel Wire 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.| Hankuk Steel vs. LG Chemicals | Hankuk Steel vs. POSCO Holdings | Hankuk Steel vs. Hanwha Solutions | Hankuk Steel 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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