Correlation Between Hanjin Transportation and Samhwa Paint

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

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

Diversification Opportunities for Hanjin Transportation and Samhwa Paint

0.6

Correlation Coefficient

Hanjin Transportation  Samhwa Paint

Poor diversification

The 3 months correlation between Hanjin and Samhwa is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hanjin Transportation Co and Samhwa Paint Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samhwa Paint Industrial and Hanjin Transportation 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 Hanjin Transportation Co are associated (or correlated) with Samhwa Paint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samhwa Paint Industrial has no effect on the direction of Hanjin Transportation i.e., Hanjin Transportation and Samhwa Paint go up and down completely randomly.

Pair Corralation between Hanjin Transportation and Samhwa Paint

Assuming the 90 days trading horizon Hanjin Transportation is expected to generate 12.73 times less return on investment than Samhwa Paint. But when comparing it to its historical volatility, Hanjin Transportation Co is 1.71 times less risky than Samhwa Paint. It trades about 0.0 of its potential returns per unit of risk. Samhwa Paint Industrial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  539,681  in Samhwa Paint Industrial on September 21, 2024 and sell it today you would earn a total of  108,319  from holding Samhwa Paint Industrial or generate 20.07% return on investment over 90 days.

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

Hanjin Transportation Co  vs.  Samhwa Paint Industrial

Hanjin Transportation

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hanjin Transportation Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hanjin Transportation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Samhwa Paint Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hanjin Transportation and Samhwa Paint

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

The idea behind Hanjin Transportation Co and Samhwa Paint Industrial 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.