Correlation Between Daejung Chemicals and Hanwha Techwin

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

By analyzing existing cross correlation between Daejung Chemicals Metals and Hanwha Techwin Co, you can compare the effects of market volatilities on Daejung Chemicals and Hanwha Techwin 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 Daejung Chemicals with a short position of Hanwha Techwin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and Hanwha Techwin.

Diversification Opportunities for Daejung Chemicals and Hanwha Techwin

-0.04

Correlation Coefficient

Daejung Chemicals  Hanwha Techwin

Good diversification

The 3 months correlation between Daejung and Hanwha is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and Hanwha Techwin Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Techwin and Daejung Chemicals 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 Daejung Chemicals Metals are associated (or correlated) with Hanwha Techwin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Techwin has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and Hanwha Techwin go up and down completely randomly.

Pair Corralation between Daejung Chemicals and Hanwha Techwin

Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to under-perform the Hanwha Techwin. But the stock apears to be less risky and, when comparing its historical volatility, Daejung Chemicals Metals is 2.2 times less risky than Hanwha Techwin. The stock trades about -0.08 of its potential returns per unit of risk. The Hanwha Techwin Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  31,700,000  in Hanwha Techwin Co on September 15, 2024 and sell it today you would earn a total of  600,000  from holding Hanwha Techwin Co or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.83%
Values	Daily Returns

Daejung Chemicals Metals  vs.  Hanwha Techwin Co

Daejung Chemicals Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daejung Chemicals Metals 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.

Hanwha Techwin

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Daejung Chemicals and Hanwha Techwin

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

The idea behind Daejung Chemicals Metals and Hanwha Techwin 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.