Correlation Between Insun Environment and Hanil Iron

Can any of the company-specific risk be diversified away by investing in both Insun Environment and Hanil Iron 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 Insun Environment and Hanil Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Insun Environment New and Hanil Iron Steel, you can compare the effects of market volatilities on Insun Environment and Hanil Iron 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 Insun Environment with a short position of Hanil Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insun Environment and Hanil Iron.

Diversification Opportunities for Insun Environment and Hanil Iron

0.41

Correlation Coefficient

Insun Environment  Hanil Iron

Very weak diversification

The 3 months correlation between Insun and Hanil is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Insun Environment New and Hanil Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanil Iron Steel and Insun Environment 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 Insun Environment New are associated (or correlated) with Hanil Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanil Iron Steel has no effect on the direction of Insun Environment i.e., Insun Environment and Hanil Iron go up and down completely randomly.

Pair Corralation between Insun Environment and Hanil Iron

Assuming the 90 days trading horizon Insun Environment New is expected to generate 1.23 times more return on investment than Hanil Iron. However, Insun Environment is 1.23 times more volatile than Hanil Iron Steel. It trades about -0.05 of its potential returns per unit of risk. Hanil Iron Steel is currently generating about -0.07 per unit of risk. If you would invest  652,000  in Insun Environment New on September 24, 2024 and sell it today you would lose (116,000) from holding Insun Environment New or give up 17.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

Insun Environment New  vs.  Hanil Iron Steel

Insun Environment New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insun Environment New 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.

Hanil Iron Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Insun Environment and Hanil Iron

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

The idea behind Insun Environment New and Hanil Iron Steel 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.