Correlation Between Hanyang ENG and SEOHAN Const

Can any of the company-specific risk be diversified away by investing in both Hanyang ENG and SEOHAN Const 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 Hanyang ENG and SEOHAN Const into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hanyang ENG Co and SEOHAN Const EngcoLtd, you can compare the effects of market volatilities on Hanyang ENG and SEOHAN Const 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 Hanyang ENG with a short position of SEOHAN Const. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanyang ENG and SEOHAN Const.

Diversification Opportunities for Hanyang ENG and SEOHAN Const

0.62

Correlation Coefficient

Hanyang ENG  SEOHAN Const

Poor diversification

The 3 months correlation between Hanyang and SEOHAN is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hanyang ENG Co and SEOHAN Const EngcoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEOHAN Const EngcoLtd and Hanyang ENG 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 Hanyang ENG Co are associated (or correlated) with SEOHAN Const. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEOHAN Const EngcoLtd has no effect on the direction of Hanyang ENG i.e., Hanyang ENG and SEOHAN Const go up and down completely randomly.

Pair Corralation between Hanyang ENG and SEOHAN Const

Assuming the 90 days trading horizon Hanyang ENG Co is expected to under-perform the SEOHAN Const. In addition to that, Hanyang ENG is 1.28 times more volatile than SEOHAN Const EngcoLtd. It trades about -0.09 of its total potential returns per unit of risk. SEOHAN Const EngcoLtd is currently generating about -0.05 per unit of volatility. If you would invest  83,500  in SEOHAN Const EngcoLtd on September 3, 2024 and sell it today you would lose (3,200) from holding SEOHAN Const EngcoLtd or give up 3.83% of portfolio value over 90 days.

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

Hanyang ENG Co  vs.  SEOHAN Const EngcoLtd

Hanyang ENG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanyang ENG Co 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.

SEOHAN Const EngcoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hanyang ENG and SEOHAN Const

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

The idea behind Hanyang ENG Co and SEOHAN Const EngcoLtd 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..