Correlation Between Hanjin Transportation and ECSTELECOM

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

Diversification Opportunities for Hanjin Transportation and ECSTELECOM

0.64

Correlation Coefficient

Hanjin Transportation  ECSTELECOM

Poor diversification

The 3 months correlation between Hanjin and ECSTELECOM is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hanjin Transportation Co and ECSTELECOM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECSTELECOM 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 ECSTELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECSTELECOM has no effect on the direction of Hanjin Transportation i.e., Hanjin Transportation and ECSTELECOM go up and down completely randomly.

Pair Corralation between Hanjin Transportation and ECSTELECOM

Assuming the 90 days trading horizon Hanjin Transportation is expected to generate 1.54 times less return on investment than ECSTELECOM. But when comparing it to its historical volatility, Hanjin Transportation Co is 1.92 times less risky than ECSTELECOM. It trades about 0.12 of its potential returns per unit of risk. ECSTELECOM Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  283,000  in ECSTELECOM Co on December 2, 2024 and sell it today you would earn a total of  27,500  from holding ECSTELECOM Co or generate 9.72% 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.  ECSTELECOM Co

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.

ECSTELECOM

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ECSTELECOM Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ECSTELECOM may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hanjin Transportation and ECSTELECOM

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

The idea behind Hanjin Transportation Co and ECSTELECOM 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.