Correlation Between Hanjoo Light and Microfriend
Can any of the company-specific risk be diversified away by investing in both Hanjoo Light and Microfriend 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 Microfriend 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 Microfriend, you can compare the effects of market volatilities on Hanjoo Light and Microfriend 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 Microfriend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanjoo Light and Microfriend.
Diversification Opportunities for Hanjoo Light and Microfriend
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hanjoo and Microfriend is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hanjoo Light Metal and Microfriend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microfriend 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 Microfriend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microfriend has no effect on the direction of Hanjoo Light i.e., Hanjoo Light and Microfriend go up and down completely randomly.
Pair Corralation between Hanjoo Light and Microfriend
Assuming the 90 days trading horizon Hanjoo Light Metal is expected to under-perform the Microfriend. But the stock apears to be less risky and, when comparing its historical volatility, Hanjoo Light Metal is 1.15 times less risky than Microfriend. The stock trades about -0.1 of its potential returns per unit of risk. The Microfriend is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 717,000 in Microfriend on November 3, 2024 and sell it today you would lose (453,500) from holding Microfriend or give up 63.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.58% |
| Values | Daily Returns |
Hanjoo Light Metal vs. Microfriend
Performance |
| Timeline |
| Hanjoo Light Metal |
| Microfriend |
Hanjoo Light and Microfriend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanjoo Light and Microfriend
The main advantage of trading using opposite Hanjoo Light and Microfriend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanjoo Light position performs unexpectedly, Microfriend 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 Microfriend will offset losses from the drop in Microfriend's long position.| Hanjoo Light vs. Samyoung Electronics Co | Hanjoo Light vs. SungMoon Electronics Co | Hanjoo Light vs. Vissem Electronics Co | Hanjoo Light vs. Sungmoon Electronics Co |
| Microfriend vs. Samyang Foods Co | Microfriend vs. KEPCO Engineering Construction | Microfriend vs. Daewoo Engineering Construction | Microfriend vs. Alton Sports CoLtd |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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