Correlation Between Seah Steel and Hanil Iron

Can any of the company-specific risk be diversified away by investing in both Seah Steel and Hanil Iron 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 Seah Steel and Hanil Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Seah Steel Corp and Hanil Iron Steel, you can compare the effects of market volatilities on Seah Steel and Hanil Iron 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 Seah Steel with a short position of Hanil Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seah Steel and Hanil Iron.

Diversification Opportunities for Seah Steel and Hanil Iron

0.63

Correlation Coefficient

Seah Steel  Hanil Iron

Poor diversification

The 3 months correlation between Seah and Hanil is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Seah Steel Corp and Hanil Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanil Iron Steel and Seah Steel 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 Seah Steel Corp are associated (or correlated) with Hanil Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanil Iron Steel has no effect on the direction of Seah Steel i.e., Seah Steel and Hanil Iron go up and down completely randomly.

Pair Corralation between Seah Steel and Hanil Iron

Assuming the 90 days trading horizon Seah Steel is expected to generate 17.81 times less return on investment than Hanil Iron. But when comparing it to its historical volatility, Seah Steel Corp is 1.07 times less risky than Hanil Iron. It trades about 0.0 of its potential returns per unit of risk. Hanil Iron Steel is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  205,000  in Hanil Iron Steel on September 3, 2024 and sell it today you would earn a total of  5,500  from holding Hanil Iron Steel or generate 2.68% return on investment over 90 days.

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

Seah Steel Corp  vs.  Hanil Iron Steel

Seah Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hanil Iron Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hanil Iron Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hanil Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Seah Steel and Hanil Iron

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

The idea behind Seah Steel Corp and Hanil Iron 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 CEOs Directory module to screen CEOs from public companies around the world.