Correlation Between Histeel and Foodnamoo
Can any of the company-specific risk be diversified away by investing in both Histeel and Foodnamoo 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 Histeel and Foodnamoo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Histeel and Foodnamoo, you can compare the effects of market volatilities on Histeel and Foodnamoo 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 Histeel with a short position of Foodnamoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Histeel and Foodnamoo.
Diversification Opportunities for Histeel and Foodnamoo
Very weak diversification
The 3 months correlation between Histeel and Foodnamoo is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Histeel and Foodnamoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foodnamoo and Histeel 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 Histeel are associated (or correlated) with Foodnamoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foodnamoo has no effect on the direction of Histeel i.e., Histeel and Foodnamoo go up and down completely randomly.
Pair Corralation between Histeel and Foodnamoo
Assuming the 90 days trading horizon Histeel is expected to generate 1.39 times more return on investment than Foodnamoo. However, Histeel is 1.39 times more volatile than Foodnamoo. It trades about -0.01 of its potential returns per unit of risk. Foodnamoo is currently generating about -0.08 per unit of risk. If you would invest 312,500 in Histeel on September 1, 2024 and sell it today you would lose (7,500) from holding Histeel or give up 2.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Histeel vs. Foodnamoo
Performance |
| Timeline |
| Histeel |
| Foodnamoo |
Histeel and Foodnamoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Histeel and Foodnamoo
The main advantage of trading using opposite Histeel and Foodnamoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Histeel position performs unexpectedly, Foodnamoo 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 Foodnamoo will offset losses from the drop in Foodnamoo's long position.| Histeel vs. LG Chemicals | Histeel vs. POSCO Holdings | Histeel vs. Hanwha Solutions | Histeel vs. Hyundai Steel |
| Foodnamoo vs. Choil Aluminum | Foodnamoo vs. PJ Metal Co | Foodnamoo vs. Youngsin Metal Industrial | Foodnamoo vs. Histeel |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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