Correlation Between SK Chemicals and Hanwha Solutions
Can any of the company-specific risk be diversified away by investing in both SK Chemicals and Hanwha Solutions 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 SK Chemicals and Hanwha Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SK Chemicals Co and Hanwha Solutions, you can compare the effects of market volatilities on SK Chemicals and Hanwha Solutions 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 SK Chemicals with a short position of Hanwha Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Chemicals and Hanwha Solutions.
Diversification Opportunities for SK Chemicals and Hanwha Solutions
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 28513K and Hanwha is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SK Chemicals Co and Hanwha Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Solutions and SK Chemicals 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 SK Chemicals Co are associated (or correlated) with Hanwha Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Solutions has no effect on the direction of SK Chemicals i.e., SK Chemicals and Hanwha Solutions go up and down completely randomly.
Pair Corralation between SK Chemicals and Hanwha Solutions
Assuming the 90 days trading horizon SK Chemicals Co is expected to under-perform the Hanwha Solutions. But the stock apears to be less risky and, when comparing its historical volatility, SK Chemicals Co is 2.3 times less risky than Hanwha Solutions. The stock trades about -0.1 of its potential returns per unit of risk. The Hanwha Solutions is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2,505,000 in Hanwha Solutions on October 26, 2024 and sell it today you would lose (580,000) from holding Hanwha Solutions or give up 23.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Chemicals Co vs. Hanwha Solutions
Performance |
| Timeline |
| SK Chemicals |
| Hanwha Solutions |
SK Chemicals and Hanwha Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Chemicals and Hanwha Solutions
The main advantage of trading using opposite SK Chemicals and Hanwha Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Chemicals position performs unexpectedly, Hanwha Solutions 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 Hanwha Solutions will offset losses from the drop in Hanwha Solutions' long position.| SK Chemicals vs. Display Tech Co | SK Chemicals vs. Inzi Display CoLtd | SK Chemicals vs. Nable Communications | SK Chemicals vs. Ssangyong Information Communication |
| Hanwha Solutions vs. SK Chemicals Co | Hanwha Solutions vs. Dongnam Chemical Co | Hanwha Solutions vs. Formetal Co | Hanwha Solutions vs. Daewon Chemical 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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