Correlation Between Hannong Chemicals and Korea Computer

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

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

Diversification Opportunities for Hannong Chemicals and Korea Computer

-0.71

Correlation Coefficient

Hannong Chemicals  Korea Computer

Pay attention - limited upside

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

Pair Corralation between Hannong Chemicals and Korea Computer

Assuming the 90 days trading horizon Hannong Chemicals is expected to under-perform the Korea Computer. But the stock apears to be less risky and, when comparing its historical volatility, Hannong Chemicals is 1.34 times less risky than Korea Computer. The stock trades about -0.09 of its potential returns per unit of risk. The Korea Computer Systems is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  617,000  in Korea Computer Systems on August 30, 2024 and sell it today you would earn a total of  172,000  from holding Korea Computer Systems or generate 27.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Hannong Chemicals  vs.  Korea Computer Systems

Hannong Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hannong Chemicals 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Korea Computer Systems

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Computer Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Computer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hannong Chemicals and Korea Computer

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

The idea behind Hannong Chemicals and Korea Computer Systems 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.