Correlation Between Hankuk Steel and Kolon Life
Can any of the company-specific risk be diversified away by investing in both Hankuk Steel and Kolon Life 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 Hankuk Steel and Kolon Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hankuk Steel Wire and Kolon Life Science, you can compare the effects of market volatilities on Hankuk Steel and Kolon Life 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 Hankuk Steel with a short position of Kolon Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankuk Steel and Kolon Life.
Diversification Opportunities for Hankuk Steel and Kolon Life
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Hankuk and Kolon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Hankuk Steel Wire and Kolon Life Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kolon Life Science and Hankuk Steel 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 Hankuk Steel Wire are associated (or correlated) with Kolon Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kolon Life Science has no effect on the direction of Hankuk Steel i.e., Hankuk Steel and Kolon Life go up and down completely randomly.
Pair Corralation between Hankuk Steel and Kolon Life
Assuming the 90 days trading horizon Hankuk Steel Wire is expected to generate 0.72 times more return on investment than Kolon Life. However, Hankuk Steel Wire is 1.38 times less risky than Kolon Life. It trades about 0.01 of its potential returns per unit of risk. Kolon Life Science is currently generating about -0.02 per unit of risk. If you would invest 382,644 in Hankuk Steel Wire on September 12, 2024 and sell it today you would lose (2,644) from holding Hankuk Steel Wire or give up 0.69% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Hankuk Steel Wire vs. Kolon Life Science
Performance |
Timeline |
Hankuk Steel Wire |
Kolon Life Science |
Hankuk Steel and Kolon Life Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hankuk Steel and Kolon Life
The main advantage of trading using opposite Hankuk Steel and Kolon Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankuk Steel position performs unexpectedly, Kolon Life 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 Kolon Life will offset losses from the drop in Kolon Life's long position.Hankuk Steel vs. LG Chemicals | Hankuk Steel vs. POSCO Holdings | Hankuk Steel vs. Hanwha Solutions | Hankuk Steel vs. Lotte Chemical Corp |
Kolon Life vs. Seoul Electronics Telecom | Kolon Life vs. Korea Information Communications | Kolon Life vs. Han Kook Steel | Kolon Life vs. Hankuk Steel Wire |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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