Correlation Between Jeju Beer and Han Kook

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

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

Diversification Opportunities for Jeju Beer and Han Kook

0.21

Correlation Coefficient

Jeju Beer  Han Kook

Modest diversification

The 3 months correlation between Jeju and Han is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Beer Co and Han Kook Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Han Kook Steel and Jeju Beer 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 Jeju Beer Co are associated (or correlated) with Han Kook. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Han Kook Steel has no effect on the direction of Jeju Beer i.e., Jeju Beer and Han Kook go up and down completely randomly.

Pair Corralation between Jeju Beer and Han Kook

Assuming the 90 days trading horizon Jeju Beer Co is expected to generate 0.96 times more return on investment than Han Kook. However, Jeju Beer Co is 1.05 times less risky than Han Kook. It trades about 0.0 of its potential returns per unit of risk. Han Kook Steel is currently generating about 0.0 per unit of risk. If you would invest  307,500  in Jeju Beer Co on September 13, 2024 and sell it today you would lose (12,500) from holding Jeju Beer Co or give up 4.07% of portfolio value over 90 days.

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

Jeju Beer Co  vs.  Han Kook Steel

Jeju Beer

Risk-Adjusted Performance

0 of 100

Very Weak

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

Han Kook Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jeju Beer and Han Kook

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

The idea behind Jeju Beer Co and Han Kook Steel 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..