Correlation Between Hanwha Solutions and Hanil Chemical

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

By analyzing existing cross correlation between Hanwha Solutions and Hanil Chemical Ind, you can compare the effects of market volatilities on Hanwha Solutions and Hanil Chemical 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 Hanwha Solutions with a short position of Hanil Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanwha Solutions and Hanil Chemical.

Diversification Opportunities for Hanwha Solutions and Hanil Chemical

0.71

Correlation Coefficient

Hanwha Solutions  Hanil Chemical

Poor diversification

The 3 months correlation between Hanwha and Hanil is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hanwha Solutions and Hanil Chemical Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanil Chemical Ind and Hanwha Solutions 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 Hanwha Solutions are associated (or correlated) with Hanil Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanil Chemical Ind has no effect on the direction of Hanwha Solutions i.e., Hanwha Solutions and Hanil Chemical go up and down completely randomly.

Pair Corralation between Hanwha Solutions and Hanil Chemical

Assuming the 90 days trading horizon Hanwha Solutions is expected to under-perform the Hanil Chemical. In addition to that, Hanwha Solutions is 1.21 times more volatile than Hanil Chemical Ind. It trades about -0.06 of its total potential returns per unit of risk. Hanil Chemical Ind is currently generating about 0.22 per unit of volatility. If you would invest  996,590  in Hanil Chemical Ind on October 1, 2024 and sell it today you would earn a total of  135,410  from holding Hanil Chemical Ind or generate 13.59% return on investment over 90 days.

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

Hanwha Solutions  vs.  Hanil Chemical Ind

Hanwha Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanwha Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hanil Chemical Ind

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hanwha Solutions and Hanil Chemical

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

The idea behind Hanwha Solutions and Hanil Chemical Ind 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.