Correlation Between Korea Real and Hwaseung Industries

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

Diversification Opportunities for Korea Real and Hwaseung Industries

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Korea and Hwaseung is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate and Hwaseung Industries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwaseung Industries and Korea Real 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 Korea Real Estate are associated (or correlated) with Hwaseung Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwaseung Industries has no effect on the direction of Korea Real i.e., Korea Real and Hwaseung Industries go up and down completely randomly.

Pair Corralation between Korea Real and Hwaseung Industries

Assuming the 90 days trading horizon Korea Real is expected to generate 76.4 times less return on investment than Hwaseung Industries. But when comparing it to its historical volatility, Korea Real Estate is 1.69 times less risky than Hwaseung Industries. It trades about 0.0 of its potential returns per unit of risk. Hwaseung Industries Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  415,000  in Hwaseung Industries Co on September 7, 2024 and sell it today you would earn a total of  11,500  from holding Hwaseung Industries Co or generate 2.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Korea Real Estate  vs.  Hwaseung Industries Co

 Performance 
       Timeline  
Korea Real Estate 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Hwaseung Industries Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hwaseung Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Korea Real and Hwaseung Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Korea Real and Hwaseung Industries

The main advantage of trading using opposite Korea Real and Hwaseung Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Real position performs unexpectedly, Hwaseung Industries 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 Hwaseung Industries will offset losses from the drop in Hwaseung Industries' long position.
The idea behind Korea Real Estate and Hwaseung Industries Co 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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