Correlation Between SCI Information and Hankook Steel
Can any of the company-specific risk be diversified away by investing in both SCI Information and Hankook 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 SCI Information and Hankook Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SCI Information Service and Hankook Steel Co, you can compare the effects of market volatilities on SCI Information and Hankook 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 SCI Information with a short position of Hankook Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCI Information and Hankook Steel.
Diversification Opportunities for SCI Information and Hankook Steel
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SCI and Hankook is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SCI Information Service and Hankook Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Steel and SCI Information 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 SCI Information Service are associated (or correlated) with Hankook Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Steel has no effect on the direction of SCI Information i.e., SCI Information and Hankook Steel go up and down completely randomly.
Pair Corralation between SCI Information and Hankook Steel
Assuming the 90 days trading horizon SCI Information Service is expected to under-perform the Hankook Steel. But the stock apears to be less risky and, when comparing its historical volatility, SCI Information Service is 3.12 times less risky than Hankook Steel. The stock trades about -0.21 of its potential returns per unit of risk. The Hankook Steel Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 198,500 in Hankook Steel Co on September 5, 2024 and sell it today you would earn a total of 6,000 from holding Hankook Steel Co or generate 3.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SCI Information Service vs. Hankook Steel Co
Performance |
| Timeline |
| SCI Information Service |
| Hankook Steel |
SCI Information and Hankook Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SCI Information and Hankook Steel
The main advantage of trading using opposite SCI Information and Hankook Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCI Information position performs unexpectedly, Hankook 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 Hankook Steel will offset losses from the drop in Hankook Steel's long position.| SCI Information vs. Dongjin Semichem Co | SCI Information vs. AhnLab Inc | SCI Information vs. Posco ICT | SCI Information vs. CJ ENM |
| Hankook Steel vs. AptaBio Therapeutics | Hankook Steel vs. Daewoo SBI SPAC | Hankook Steel vs. Dream Security co | Hankook Steel vs. Microfriend |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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