Correlation Between Hana Financial and NICE Information

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

By analyzing existing cross correlation between Hana Financial 7 and NICE Information Service, you can compare the effects of market volatilities on Hana Financial and NICE Information 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 Financial with a short position of NICE Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hana Financial and NICE Information.

Diversification Opportunities for Hana Financial and NICE Information

0.74

Correlation Coefficient

Hana Financial  NICE Information

Poor diversification

The 3 months correlation between Hana and NICE is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hana Financial 7 and NICE Information Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NICE Information Service and Hana Financial 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 Financial 7 are associated (or correlated) with NICE Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NICE Information Service has no effect on the direction of Hana Financial i.e., Hana Financial and NICE Information go up and down completely randomly.

Pair Corralation between Hana Financial and NICE Information

Assuming the 90 days trading horizon Hana Financial 7 is expected to generate 2.89 times more return on investment than NICE Information. However, Hana Financial is 2.89 times more volatile than NICE Information Service. It trades about 0.4 of its potential returns per unit of risk. NICE Information Service is currently generating about 0.19 per unit of risk. If you would invest  982,000  in Hana Financial 7 on September 20, 2024 and sell it today you would earn a total of  553,000  from holding Hana Financial 7 or generate 56.31% return on investment over 90 days.

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

Hana Financial 7  vs.  NICE Information Service

Hana Financial 7

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hana Financial 7 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hana Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

NICE Information Service

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NICE Information Service are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NICE Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hana Financial and NICE Information

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

The idea behind Hana Financial 7 and NICE Information Service 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 Stocks Directory module to find actively traded stocks across global markets.