Correlation Between SK Chemicals and Hanwha Life
Can any of the company-specific risk be diversified away by investing in both SK Chemicals and Hanwha Life 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 Life 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 Life Insurance, you can compare the effects of market volatilities on SK Chemicals and Hanwha Life 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 Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Chemicals and Hanwha Life.
Diversification Opportunities for SK Chemicals and Hanwha Life
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 28513K and Hanwha is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SK Chemicals Co and Hanwha Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Life Insurance 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 Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Life Insurance has no effect on the direction of SK Chemicals i.e., SK Chemicals and Hanwha Life go up and down completely randomly.
Pair Corralation between SK Chemicals and Hanwha Life
Assuming the 90 days trading horizon SK Chemicals Co is expected to under-perform the Hanwha Life. But the stock apears to be less risky and, when comparing its historical volatility, SK Chemicals Co is 1.6 times less risky than Hanwha Life. The stock trades about -0.09 of its potential returns per unit of risk. The Hanwha Life Insurance is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 242,789 in Hanwha Life Insurance on December 11, 2024 and sell it today you would earn a total of 12,711 from holding Hanwha Life Insurance or generate 5.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Chemicals Co vs. Hanwha Life Insurance
Performance |
| Timeline |
| SK Chemicals |
| Hanwha Life Insurance |
SK Chemicals and Hanwha Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Chemicals and Hanwha Life
The main advantage of trading using opposite SK Chemicals and Hanwha Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Chemicals position performs unexpectedly, Hanwha Life 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 Life will offset losses from the drop in Hanwha Life's long position.| SK Chemicals vs. Korea Electronic Certification | ||
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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