Correlation Between Dong A and Hanwha InvestmentSecuri

Can any of the company-specific risk be diversified away by investing in both Dong A and Hanwha InvestmentSecuri 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 Dong A and Hanwha InvestmentSecuri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dong A Steel Technology and Hanwha InvestmentSecurities Co, you can compare the effects of market volatilities on Dong A and Hanwha InvestmentSecuri 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 Dong A with a short position of Hanwha InvestmentSecuri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong A and Hanwha InvestmentSecuri.

Diversification Opportunities for Dong A and Hanwha InvestmentSecuri

0.72

Correlation Coefficient

Dong A  Hanwha InvestmentSecuri

Poor diversification

The 3 months correlation between Dong and Hanwha is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and Hanwha InvestmentSecurities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha InvestmentSecuri and Dong A 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 Dong A Steel Technology are associated (or correlated) with Hanwha InvestmentSecuri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha InvestmentSecuri has no effect on the direction of Dong A i.e., Dong A and Hanwha InvestmentSecuri go up and down completely randomly.

Pair Corralation between Dong A and Hanwha InvestmentSecuri

Assuming the 90 days trading horizon Dong A is expected to generate 3.11 times less return on investment than Hanwha InvestmentSecuri. But when comparing it to its historical volatility, Dong A Steel Technology is 1.5 times less risky than Hanwha InvestmentSecuri. It trades about 0.03 of its potential returns per unit of risk. Hanwha InvestmentSecurities Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  641,000  in Hanwha InvestmentSecurities Co on September 3, 2024 and sell it today you would earn a total of  71,000  from holding Hanwha InvestmentSecurities Co or generate 11.08% return on investment over 90 days.

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

Dong A Steel Technology  vs.  Hanwha InvestmentSecurities Co

Dong A Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Steel Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dong A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanwha InvestmentSecuri

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hanwha InvestmentSecurities Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hanwha InvestmentSecuri sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dong A and Hanwha InvestmentSecuri

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

The idea behind Dong A Steel Technology and Hanwha InvestmentSecurities 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.