Correlation Between SK Hynix and Hanjin Transportation

Can any of the company-specific risk be diversified away by investing in both SK Hynix and Hanjin Transportation 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 SK Hynix and Hanjin Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for SK Hynix and Hanjin Transportation

0.8

Correlation Coefficient

SK Hynix  Hanjin Transportation

Very poor diversification

The 3 months correlation between 000660 and Hanjin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and Hanjin Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjin Transportation and SK Hynix 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 SK Hynix are associated (or correlated) with Hanjin Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjin Transportation has no effect on the direction of SK Hynix i.e., SK Hynix and Hanjin Transportation go up and down completely randomly.

Pair Corralation between SK Hynix and Hanjin Transportation

Assuming the 90 days trading horizon SK Hynix is expected to generate 3.4 times more return on investment than Hanjin Transportation. However, SK Hynix is 3.4 times more volatile than Hanjin Transportation Co. It trades about 0.12 of its potential returns per unit of risk. Hanjin Transportation Co is currently generating about 0.12 per unit of risk. If you would invest  15,778,000  in SK Hynix on December 2, 2024 and sell it today you would earn a total of  3,242,000  from holding SK Hynix or generate 20.55% return on investment over 90 days.

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

SK Hynix  vs.  Hanjin Transportation Co

SK Hynix

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SK Hynix are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SK Hynix sustained solid returns over the last few months and may actually be approaching a breakup point.

Hanjin Transportation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hanjin Transportation Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hanjin Transportation may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SK Hynix and Hanjin Transportation

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

The idea behind SK Hynix and Hanjin Transportation 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.