Correlation Between RFTech and Hwangkum Steel

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

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

Diversification Opportunities for RFTech and Hwangkum Steel

0.27

Correlation Coefficient

RFTech  Hwangkum Steel

Modest diversification

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

Pair Corralation between RFTech and Hwangkum Steel

Assuming the 90 days trading horizon RFTech Co is expected to generate 1.63 times more return on investment than Hwangkum Steel. However, RFTech is 1.63 times more volatile than Hwangkum Steel Technology. It trades about 0.13 of its potential returns per unit of risk. Hwangkum Steel Technology is currently generating about -0.07 per unit of risk. If you would invest  322,000  in RFTech Co on September 4, 2024 and sell it today you would earn a total of  45,500  from holding RFTech Co or generate 14.13% return on investment over 90 days.

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

RFTech Co  vs.  Hwangkum Steel Technology

RFTech

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RFTech Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RFTech sustained solid returns over the last few months and may actually be approaching a breakup point.

Hwangkum Steel Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with RFTech and Hwangkum Steel

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

The idea behind RFTech Co and Hwangkum Steel Technology 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.