Correlation Between KCI and Hanwha Aerospace
Can any of the company-specific risk be diversified away by investing in both KCI and Hanwha Aerospace 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 KCI and Hanwha Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KCI Limited and Hanwha Aerospace Co, you can compare the effects of market volatilities on KCI and Hanwha Aerospace 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 KCI with a short position of Hanwha Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of KCI and Hanwha Aerospace.
Diversification Opportunities for KCI and Hanwha Aerospace
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KCI and Hanwha is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding KCI Limited and Hanwha Aerospace Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Aerospace and KCI 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 KCI Limited are associated (or correlated) with Hanwha Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Aerospace has no effect on the direction of KCI i.e., KCI and Hanwha Aerospace go up and down completely randomly.
Pair Corralation between KCI and Hanwha Aerospace
Assuming the 90 days trading horizon KCI Limited is expected to under-perform the Hanwha Aerospace. But the stock apears to be less risky and, when comparing its historical volatility, KCI Limited is 2.5 times less risky than Hanwha Aerospace. The stock trades about -0.03 of its potential returns per unit of risk. The Hanwha Aerospace Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,766,378 in Hanwha Aerospace Co on September 3, 2024 and sell it today you would earn a total of 24,483,622 from holding Hanwha Aerospace Co or generate 361.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KCI Limited vs. Hanwha Aerospace Co
Performance |
| Timeline |
| KCI Limited |
| Hanwha Aerospace |
KCI and Hanwha Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KCI and Hanwha Aerospace
The main advantage of trading using opposite KCI and Hanwha Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KCI position performs unexpectedly, Hanwha Aerospace 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 Hanwha Aerospace will offset losses from the drop in Hanwha Aerospace's long position.| KCI vs. DB Financial Investment | KCI vs. Daou Data Corp | KCI vs. Lindeman Asia Investment | KCI vs. SCI Information Service |
| Hanwha Aerospace vs. INFINITT Healthcare Co | Hanwha Aerospace vs. Atinum Investment Co | Hanwha Aerospace vs. CKH Food Health | Hanwha Aerospace vs. SV Investment |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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