Correlation Between Hansol Chemica and KG Eco

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

By analyzing existing cross correlation between Hansol Chemica and KG Eco Technology, you can compare the effects of market volatilities on Hansol Chemica and KG Eco 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 Hansol Chemica with a short position of KG Eco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hansol Chemica and KG Eco.

Diversification Opportunities for Hansol Chemica and KG Eco

0.78

Correlation Coefficient

Hansol Chemica  KG Eco

Poor diversification

The 3 months correlation between Hansol and 151860 is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hansol Chemica and KG Eco Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KG Eco Technology and Hansol Chemica 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 Hansol Chemica are associated (or correlated) with KG Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KG Eco Technology has no effect on the direction of Hansol Chemica i.e., Hansol Chemica and KG Eco go up and down completely randomly.

Pair Corralation between Hansol Chemica and KG Eco

Assuming the 90 days trading horizon Hansol Chemica is expected to under-perform the KG Eco. But the stock apears to be less risky and, when comparing its historical volatility, Hansol Chemica is 1.07 times less risky than KG Eco. The stock trades about -0.1 of its potential returns per unit of risk. The KG Eco Technology is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  561,000  in KG Eco Technology on September 23, 2024 and sell it today you would lose (71,000) from holding KG Eco Technology or give up 12.66% of portfolio value over 90 days.

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

Hansol Chemica  vs.  KG Eco Technology

Hansol Chemica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hansol Chemica 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.

KG Eco Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KG Eco Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hansol Chemica and KG Eco

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

The idea behind Hansol Chemica and KG Eco Technology 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 Global Correlations module to find global opportunities by holding instruments from different markets.