Correlation Between Hanjin Transportation and Alton Sports

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

Diversification Opportunities for Hanjin Transportation and Alton Sports

0.6

Correlation Coefficient

Hanjin Transportation  Alton Sports

Poor diversification

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

Pair Corralation between Hanjin Transportation and Alton Sports

Assuming the 90 days trading horizon Hanjin Transportation Co is expected to generate 0.33 times more return on investment than Alton Sports. However, Hanjin Transportation Co is 3.03 times less risky than Alton Sports. It trades about 0.14 of its potential returns per unit of risk. Alton Sports CoLtd is currently generating about 0.02 per unit of risk. If you would invest  1,877,244  in Hanjin Transportation Co on December 23, 2024 and sell it today you would earn a total of  94,756  from holding Hanjin Transportation Co or generate 5.05% 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.  Alton Sports CoLtd

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 10 (%) 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.

Alton Sports CoLtd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alton Sports CoLtd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alton Sports 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 Alton Sports

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

The idea behind Hanjin Transportation Co and Alton Sports CoLtd 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.