Correlation Between Home Center and Korea Refractories
Can any of the company-specific risk be diversified away by investing in both Home Center and Korea Refractories 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 Home Center and Korea Refractories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Center Holdings and Korea Refractories Co, you can compare the effects of market volatilities on Home Center and Korea Refractories 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 Home Center with a short position of Korea Refractories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Center and Korea Refractories.
Diversification Opportunities for Home Center and Korea Refractories
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Korea is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Home Center Holdings and Korea Refractories Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Refractories and Home Center 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 Home Center Holdings are associated (or correlated) with Korea Refractories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Refractories has no effect on the direction of Home Center i.e., Home Center and Korea Refractories go up and down completely randomly.
Pair Corralation between Home Center and Korea Refractories
Assuming the 90 days trading horizon Home Center Holdings is expected to under-perform the Korea Refractories. But the stock apears to be less risky and, when comparing its historical volatility, Home Center Holdings is 1.5 times less risky than Korea Refractories. The stock trades about -0.04 of its potential returns per unit of risk. The Korea Refractories Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 283,609 in Korea Refractories Co on September 12, 2024 and sell it today you would lose (76,609) from holding Korea Refractories Co or give up 27.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Home Center Holdings vs. Korea Refractories Co
Performance |
| Timeline |
| Home Center Holdings |
| Korea Refractories |
Home Center and Korea Refractories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Center and Korea Refractories
The main advantage of trading using opposite Home Center and Korea Refractories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Center position performs unexpectedly, Korea Refractories 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 Korea Refractories will offset losses from the drop in Korea Refractories' long position.| Home Center vs. LG Chemicals | Home Center vs. POSCO Holdings | Home Center vs. Hanwha Solutions | Home Center vs. Lotte Chemical Corp |
| Korea Refractories vs. Samsung Electronics Co | Korea Refractories vs. Samsung Electronics Co | Korea Refractories vs. SK Hynix | Korea Refractories vs. POSCO Holdings |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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