Correlation Between Cheryong Industrial and Hwashin Precision
Can any of the company-specific risk be diversified away by investing in both Cheryong Industrial and Hwashin Precision 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 Cheryong Industrial and Hwashin Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheryong Industrial CoLtd and Hwashin Precision Engineering, you can compare the effects of market volatilities on Cheryong Industrial and Hwashin Precision 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 Cheryong Industrial with a short position of Hwashin Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheryong Industrial and Hwashin Precision.
Diversification Opportunities for Cheryong Industrial and Hwashin Precision
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cheryong and Hwashin is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Cheryong Industrial CoLtd and Hwashin Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwashin Precision and Cheryong Industrial 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 Cheryong Industrial CoLtd are associated (or correlated) with Hwashin Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwashin Precision has no effect on the direction of Cheryong Industrial i.e., Cheryong Industrial and Hwashin Precision go up and down completely randomly.
Pair Corralation between Cheryong Industrial and Hwashin Precision
Assuming the 90 days trading horizon Cheryong Industrial CoLtd is expected to generate 0.92 times more return on investment than Hwashin Precision. However, Cheryong Industrial CoLtd is 1.09 times less risky than Hwashin Precision. It trades about 0.31 of its potential returns per unit of risk. Hwashin Precision Engineering is currently generating about 0.22 per unit of risk. If you would invest 470,031 in Cheryong Industrial CoLtd on October 7, 2024 and sell it today you would earn a total of 98,969 from holding Cheryong Industrial CoLtd or generate 21.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheryong Industrial CoLtd vs. Hwashin Precision Engineering
Performance |
| Timeline |
| Cheryong Industrial CoLtd |
| Hwashin Precision |
Cheryong Industrial and Hwashin Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheryong Industrial and Hwashin Precision
The main advantage of trading using opposite Cheryong Industrial and Hwashin Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheryong Industrial position performs unexpectedly, Hwashin Precision 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 Hwashin Precision will offset losses from the drop in Hwashin Precision's long position.| Cheryong Industrial vs. Lion Chemtech Co | Cheryong Industrial vs. Kuk Young GM | Cheryong Industrial vs. Nature and Environment |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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