Correlation Between Hanjoo Light and Korea Industrial

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Can any of the company-specific risk be diversified away by investing in both Hanjoo Light and Korea Industrial 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 Hanjoo Light and Korea Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hanjoo Light Metal and Korea Industrial Co, you can compare the effects of market volatilities on Hanjoo Light and Korea Industrial 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 Hanjoo Light with a short position of Korea Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanjoo Light and Korea Industrial.

Diversification Opportunities for Hanjoo Light and Korea Industrial

HanjooKoreaDiversified AwayHanjooKoreaDiversified Away100%
-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between Hanjoo and Korea is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Hanjoo Light Metal and Korea Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Industrial and Hanjoo Light 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 Hanjoo Light Metal are associated (or correlated) with Korea Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Industrial has no effect on the direction of Hanjoo Light i.e., Hanjoo Light and Korea Industrial go up and down completely randomly.

Pair Corralation between Hanjoo Light and Korea Industrial

Assuming the 90 days trading horizon Hanjoo Light Metal is expected to under-perform the Korea Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Hanjoo Light Metal is 1.45 times less risky than Korea Industrial. The stock trades about -0.31 of its potential returns per unit of risk. The Korea Industrial Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  277,500  in Korea Industrial Co on November 25, 2024 and sell it today you would earn a total of  19,000  from holding Korea Industrial Co or generate 6.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hanjoo Light Metal  vs.  Korea Industrial Co

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-10010
JavaScript chart by amCharts 3.21.15198940 002140
       Timeline  
Hanjoo Light Metal 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Hanjoo Light Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb700750800850
Korea Industrial 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Korea Industrial Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Industrial may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2,4002,5002,6002,7002,8002,9003,0003,1003,200

Hanjoo Light and Korea Industrial Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.6-2.69-1.79-0.890.00.771.552.323.1 0.050.060.070.080.09
JavaScript chart by amCharts 3.21.15198940 002140
       Returns  

Pair Trading with Hanjoo Light and Korea Industrial

The main advantage of trading using opposite Hanjoo Light and Korea Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanjoo Light position performs unexpectedly, Korea Industrial 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 Industrial will offset losses from the drop in Korea Industrial's long position.
The idea behind Hanjoo Light Metal and Korea Industrial 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.
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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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