Correlation Between Husteel and Korea Information

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

By analyzing existing cross correlation between Husteel and Korea Information Engineering, you can compare the effects of market volatilities on Husteel and Korea Information 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 Husteel with a short position of Korea Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Husteel and Korea Information.

Diversification Opportunities for Husteel and Korea Information

0.26

Correlation Coefficient

Husteel  Korea Information

Modest diversification

The 3 months correlation between Husteel and Korea is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Husteel and Korea Information Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Information and Husteel 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 Husteel are associated (or correlated) with Korea Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Information has no effect on the direction of Husteel i.e., Husteel and Korea Information go up and down completely randomly.

Pair Corralation between Husteel and Korea Information

Assuming the 90 days trading horizon Husteel is expected to under-perform the Korea Information. But the stock apears to be less risky and, when comparing its historical volatility, Husteel is 1.35 times less risky than Korea Information. The stock trades about -0.04 of its potential returns per unit of risk. The Korea Information Engineering is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  243,500  in Korea Information Engineering on September 20, 2024 and sell it today you would earn a total of  15,500  from holding Korea Information Engineering or generate 6.37% return on investment over 90 days.

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

Husteel  vs.  Korea Information Engineering

Husteel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Husteel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Husteel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Korea Information

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Information Engineering are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Husteel and Korea Information

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

The idea behind Husteel and Korea Information Engineering 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.