Correlation Between Gyeongnam Steel and Hankuk Steel
Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel 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 Gyeongnam Steel and Hankuk Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gyeongnam Steel Co and Hankuk Steel Wire, you can compare the effects of market volatilities on Gyeongnam Steel 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 Gyeongnam Steel with a short position of Hankuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and Hankuk Steel.
Diversification Opportunities for Gyeongnam Steel and Hankuk Steel
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gyeongnam and Hankuk is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel 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 Gyeongnam 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 Gyeongnam Steel 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 Gyeongnam Steel i.e., Gyeongnam Steel and Hankuk Steel go up and down completely randomly.
Pair Corralation between Gyeongnam Steel and Hankuk Steel
Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 1.15 times more return on investment than Hankuk Steel. However, Gyeongnam Steel is 1.15 times more volatile than Hankuk Steel Wire. It trades about 0.18 of its potential returns per unit of risk. Hankuk Steel Wire is currently generating about 0.18 per unit of risk. If you would invest 275,500 in Gyeongnam Steel Co on August 29, 2024 and sell it today you would earn a total of 21,000 from holding Gyeongnam Steel Co or generate 7.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gyeongnam Steel Co vs. Hankuk Steel Wire
Performance |
| Timeline |
| Gyeongnam Steel |
| Hankuk Steel Wire |
Gyeongnam Steel and Hankuk Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gyeongnam Steel and Hankuk Steel
The main advantage of trading using opposite Gyeongnam Steel and Hankuk Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gyeongnam Steel 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.| Gyeongnam Steel vs. Sangsin Energy Display | Gyeongnam Steel vs. Dongbang Transport Logistics | Gyeongnam Steel vs. DB Insurance Co | Gyeongnam Steel vs. Digital Power Communications |
| Hankuk Steel vs. LG Chemicals | Hankuk Steel vs. Lotte Chemical Corp | Hankuk Steel vs. Hyundai Steel | Hankuk Steel vs. Seah Steel 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |