Correlation Between Dreamus and Hankook Furniture
Can any of the company-specific risk be diversified away by investing in both Dreamus and Hankook Furniture 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 Dreamus and Hankook Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreamus Company and Hankook Furniture Co, you can compare the effects of market volatilities on Dreamus and Hankook Furniture 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 Dreamus with a short position of Hankook Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreamus and Hankook Furniture.
Diversification Opportunities for Dreamus and Hankook Furniture
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dreamus and Hankook is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dreamus Company and Hankook Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Furniture and Dreamus 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 Dreamus Company are associated (or correlated) with Hankook Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Furniture has no effect on the direction of Dreamus i.e., Dreamus and Hankook Furniture go up and down completely randomly.
Pair Corralation between Dreamus and Hankook Furniture
Assuming the 90 days trading horizon Dreamus Company is expected to generate 0.83 times more return on investment than Hankook Furniture. However, Dreamus Company is 1.2 times less risky than Hankook Furniture. It trades about 0.16 of its potential returns per unit of risk. Hankook Furniture Co is currently generating about 0.08 per unit of risk. If you would invest 167,500 in Dreamus Company on November 27, 2024 and sell it today you would earn a total of 8,300 from holding Dreamus Company or generate 4.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dreamus Company vs. Hankook Furniture Co
Performance |
| Timeline |
| Dreamus Company |
| Hankook Furniture |
Dreamus and Hankook Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreamus and Hankook Furniture
The main advantage of trading using opposite Dreamus and Hankook Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreamus position performs unexpectedly, Hankook Furniture 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 Furniture will offset losses from the drop in Hankook Furniture's long position.The idea behind Dreamus Company and Hankook Furniture Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Hankook Furniture vs. Husteel | Hankook Furniture vs. Insun Environment New | Hankook Furniture vs. Nable Communications | Hankook Furniture vs. Hironic Co |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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