Correlation Between Songwon Industrial and Han Kook

Can any of the company-specific risk be diversified away by investing in both Songwon Industrial and Han Kook 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 Songwon Industrial and Han Kook into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Songwon Industrial Co and Han Kook Steel, you can compare the effects of market volatilities on Songwon Industrial and Han Kook 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 Songwon Industrial with a short position of Han Kook. Check out your portfolio center. Please also check ongoing floating volatility patterns of Songwon Industrial and Han Kook.

Diversification Opportunities for Songwon Industrial and Han Kook

0.11

Correlation Coefficient

Songwon Industrial  Han Kook

Average diversification

The 3 months correlation between Songwon and Han is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Songwon Industrial Co and Han Kook Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Han Kook Steel and Songwon Industrial 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 Songwon Industrial Co are associated (or correlated) with Han Kook. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Han Kook Steel has no effect on the direction of Songwon Industrial i.e., Songwon Industrial and Han Kook go up and down completely randomly.

Pair Corralation between Songwon Industrial and Han Kook

Assuming the 90 days trading horizon Songwon Industrial Co is expected to generate 0.79 times more return on investment than Han Kook. However, Songwon Industrial Co is 1.27 times less risky than Han Kook. It trades about 0.04 of its potential returns per unit of risk. Han Kook Steel is currently generating about 0.02 per unit of risk. If you would invest  1,019,000  in Songwon Industrial Co on September 22, 2024 and sell it today you would earn a total of  63,000  from holding Songwon Industrial Co or generate 6.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Songwon Industrial Co  vs.  Han Kook Steel

Songwon Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Songwon Industrial Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Songwon Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Han Kook Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Han Kook Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Han Kook may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Songwon Industrial and Han Kook

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

The idea behind Songwon Industrial Co and Han Kook Steel 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.