Correlation Between Home Center and Hankuk Steel
Can any of the company-specific risk be diversified away by investing in both Home Center 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 Home Center and Hankuk Steel 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 Hankuk Steel Wire, you can compare the effects of market volatilities on Home Center 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 Home Center with a short position of Hankuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Center and Hankuk Steel.
Diversification Opportunities for Home Center and Hankuk Steel
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Hankuk is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Home Center Holdings 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 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 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 Home Center i.e., Home Center and Hankuk Steel go up and down completely randomly.
Pair Corralation between Home Center and Hankuk Steel
Assuming the 90 days trading horizon Home Center Holdings is expected to under-perform the Hankuk Steel. In addition to that, Home Center is 1.18 times more volatile than Hankuk Steel Wire. It trades about -0.07 of its total potential returns per unit of risk. Hankuk Steel Wire is currently generating about -0.06 per unit of volatility. If you would invest 434,248 in Hankuk Steel Wire on August 31, 2024 and sell it today you would lose (144,248) from holding Hankuk Steel Wire or give up 33.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Center Holdings vs. Hankuk Steel Wire
Performance |
| Timeline |
| Home Center Holdings |
| Hankuk Steel Wire |
Home Center and Hankuk Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Center and Hankuk Steel
The main advantage of trading using opposite Home Center and Hankuk Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Center 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.| Home Center vs. LG Chemicals | Home Center vs. POSCO Holdings | Home Center vs. Hanwha Solutions | Home Center vs. Lotte Chemical Corp |
| Hankuk Steel vs. LG Chemicals | Hankuk Steel vs. POSCO Holdings | Hankuk Steel vs. Hanwha Solutions | Hankuk Steel vs. Lotte Chemical 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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