Correlation Between Hana Materials and Top Material

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

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

Diversification Opportunities for Hana Materials and Top Material

0.96

Correlation Coefficient

Hana Materials  Top Material

Almost no diversification

The 3 months correlation between Hana and Top is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Hana Materials and Top Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Material and Hana Materials 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 Hana Materials are associated (or correlated) with Top Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Material has no effect on the direction of Hana Materials i.e., Hana Materials and Top Material go up and down completely randomly.

Pair Corralation between Hana Materials and Top Material

Assuming the 90 days trading horizon Hana Materials is expected to generate 0.85 times more return on investment than Top Material. However, Hana Materials is 1.18 times less risky than Top Material. It trades about -0.11 of its potential returns per unit of risk. Top Material Co is currently generating about -0.15 per unit of risk. If you would invest  2,905,000  in Hana Materials on September 14, 2024 and sell it today you would lose (505,000) from holding Hana Materials or give up 17.38% of portfolio value over 90 days.

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

Hana Materials  vs.  Top Material Co

Hana Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hana Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Top Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Top Material Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hana Materials and Top Material

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

The idea behind Hana Materials and Top Material 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..