Correlation Between Hanjoo Light and Dongwoo Farm
Can any of the company-specific risk be diversified away by investing in both Hanjoo Light and Dongwoo Farm 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 Dongwoo Farm 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 Dongwoo Farm To, you can compare the effects of market volatilities on Hanjoo Light and Dongwoo Farm 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 Dongwoo Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanjoo Light and Dongwoo Farm.
Diversification Opportunities for Hanjoo Light and Dongwoo Farm
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hanjoo and Dongwoo is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hanjoo Light Metal and Dongwoo Farm To in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwoo Farm To 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 Dongwoo Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwoo Farm To has no effect on the direction of Hanjoo Light i.e., Hanjoo Light and Dongwoo Farm go up and down completely randomly.
Pair Corralation between Hanjoo Light and Dongwoo Farm
Assuming the 90 days trading horizon Hanjoo Light Metal is expected to under-perform the Dongwoo Farm. In addition to that, Hanjoo Light is 2.99 times more volatile than Dongwoo Farm To. It trades about -0.1 of its total potential returns per unit of risk. Dongwoo Farm To is currently generating about -0.11 per unit of volatility. If you would invest 301,000 in Dongwoo Farm To on September 4, 2024 and sell it today you would lose (106,800) from holding Dongwoo Farm To or give up 35.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hanjoo Light Metal vs. Dongwoo Farm To
Performance |
| Timeline |
| Hanjoo Light Metal |
| Dongwoo Farm To |
Hanjoo Light and Dongwoo Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanjoo Light and Dongwoo Farm
The main advantage of trading using opposite Hanjoo Light and Dongwoo Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanjoo Light position performs unexpectedly, Dongwoo Farm 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 Dongwoo Farm will offset losses from the drop in Dongwoo Farm's long position.| Hanjoo Light vs. Samsung Electronics Co | Hanjoo Light vs. Samsung Electronics Co | Hanjoo Light vs. LG Energy Solution | Hanjoo Light vs. SK Hynix |
| Dongwoo Farm vs. Maeil Dairies Co | Dongwoo Farm vs. HYUNDAI FEED | Dongwoo Farm vs. Neo Cremar Co | Dongwoo Farm vs. Wooyang 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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