Correlation Between Hanil Iron and ISE Commerce

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

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

Diversification Opportunities for Hanil Iron and ISE Commerce

-0.01

Correlation Coefficient

Hanil Iron  ISE Commerce

Good diversification

The 3 months correlation between Hanil and ISE is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Hanil Iron Steel and ISE Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISE Commerce and Hanil Iron 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 Hanil Iron Steel are associated (or correlated) with ISE Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISE Commerce has no effect on the direction of Hanil Iron i.e., Hanil Iron and ISE Commerce go up and down completely randomly.

Pair Corralation between Hanil Iron and ISE Commerce

Assuming the 90 days trading horizon Hanil Iron Steel is expected to under-perform the ISE Commerce. But the stock apears to be less risky and, when comparing its historical volatility, Hanil Iron Steel is 4.94 times less risky than ISE Commerce. The stock trades about -0.02 of its potential returns per unit of risk. The ISE Commerce is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  90,300  in ISE Commerce on December 30, 2024 and sell it today you would earn a total of  18,700  from holding ISE Commerce or generate 20.71% return on investment over 90 days.

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

Hanil Iron Steel  vs.  ISE Commerce

Hanil Iron Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanil Iron Steel has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

ISE Commerce

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ISE Commerce are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ISE Commerce sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanil Iron and ISE Commerce

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

The idea behind Hanil Iron Steel and ISE Commerce 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.