Correlation Between Hana Financial and Aurora World

Can any of the company-specific risk be diversified away by investing in both Hana Financial and Aurora World 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 Aurora World 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 Aurora World, you can compare the effects of market volatilities on Hana Financial and Aurora World 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 Aurora World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hana Financial and Aurora World.

Diversification Opportunities for Hana Financial and Aurora World

0.82

Correlation Coefficient

Hana Financial  Aurora World

Very poor diversification

The 3 months correlation between Hana and Aurora is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Hana Financial 7 and Aurora World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora World 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 Aurora World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora World has no effect on the direction of Hana Financial i.e., Hana Financial and Aurora World go up and down completely randomly.

Pair Corralation between Hana Financial and Aurora World

Assuming the 90 days trading horizon Hana Financial 7 is expected to generate 2.45 times more return on investment than Aurora World. However, Hana Financial is 2.45 times more volatile than Aurora World. It trades about 0.2 of its potential returns per unit of risk. Aurora World is currently generating about 0.13 per unit of risk. If you would invest  908,000  in Hana Financial 7 on September 24, 2024 and sell it today you would earn a total of  588,000  from holding Hana Financial 7 or generate 64.76% return on investment over 90 days.

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

Hana Financial 7  vs.  Aurora World

Hana Financial 7

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hana Financial 7 are ranked lower than 15 (%) 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.

Aurora World

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Hana Financial and Aurora World

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

The idea behind Hana Financial 7 and Aurora World 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.