Correlation Between Han Kook and HS Valve

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

By analyzing existing cross correlation between Han Kook Steel and HS Valve Co, you can compare the effects of market volatilities on Han Kook and HS Valve 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 Han Kook with a short position of HS Valve. Check out your portfolio center. Please also check ongoing floating volatility patterns of Han Kook and HS Valve.

Diversification Opportunities for Han Kook and HS Valve

0.27

Correlation Coefficient

Han Kook  HS Valve

Modest diversification

The 3 months correlation between Han and 039610 is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Han Kook Steel and HS Valve Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HS Valve and Han Kook 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 Han Kook Steel are associated (or correlated) with HS Valve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HS Valve has no effect on the direction of Han Kook i.e., Han Kook and HS Valve go up and down completely randomly.

Pair Corralation between Han Kook and HS Valve

Assuming the 90 days trading horizon Han Kook Steel is expected to under-perform the HS Valve. But the stock apears to be less risky and, when comparing its historical volatility, Han Kook Steel is 1.38 times less risky than HS Valve. The stock trades about -0.02 of its potential returns per unit of risk. The HS Valve Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  505,000  in HS Valve Co on September 16, 2024 and sell it today you would earn a total of  228,000  from holding HS Valve Co or generate 45.15% return on investment over 90 days.

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

Han Kook Steel  vs.  HS Valve Co

Han Kook Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Han Kook Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Han Kook may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HS Valve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HS Valve Co 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.

Pair Trading with Han Kook and HS Valve

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

The idea behind Han Kook Steel and HS Valve Co 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.