Correlation Between Hanil Iron and DataSolution

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

Diversification Opportunities for Hanil Iron and DataSolution

0.4

Correlation Coefficient

Hanil Iron  DataSolution

Very weak diversification

The 3 months correlation between Hanil and DataSolution is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hanil Iron Steel and DataSolution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DataSolution 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 DataSolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DataSolution has no effect on the direction of Hanil Iron i.e., Hanil Iron and DataSolution go up and down completely randomly.

Pair Corralation between Hanil Iron and DataSolution

Assuming the 90 days trading horizon Hanil Iron is expected to generate 11.99 times less return on investment than DataSolution. But when comparing it to its historical volatility, Hanil Iron Steel is 2.34 times less risky than DataSolution. It trades about 0.06 of its potential returns per unit of risk. DataSolution is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  383,000  in DataSolution on October 10, 2024 and sell it today you would earn a total of  91,000  from holding DataSolution or generate 23.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Hanil Iron Steel  vs.  DataSolution

Hanil Iron Steel

Risk-Adjusted Performance

0 of 100

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.

DataSolution

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DataSolution are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DataSolution may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hanil Iron and DataSolution

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

The idea behind Hanil Iron Steel and DataSolution 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.