Correlation Between Hanjin Transportation and Daewoo SBI

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

Diversification Opportunities for Hanjin Transportation and Daewoo SBI

0.59

Correlation Coefficient

Hanjin Transportation  Daewoo SBI

Very weak diversification

The 3 months correlation between Hanjin and Daewoo is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hanjin Transportation Co and Daewoo SBI SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo SBI SPAC 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 Daewoo SBI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo SBI SPAC has no effect on the direction of Hanjin Transportation i.e., Hanjin Transportation and Daewoo SBI go up and down completely randomly.

Pair Corralation between Hanjin Transportation and Daewoo SBI

Assuming the 90 days trading horizon Hanjin Transportation is expected to generate 1.72 times less return on investment than Daewoo SBI. But when comparing it to its historical volatility, Hanjin Transportation Co is 5.03 times less risky than Daewoo SBI. It trades about 0.63 of its potential returns per unit of risk. Daewoo SBI SPAC is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  242,500  in Daewoo SBI SPAC on October 9, 2024 and sell it today you would earn a total of  47,000  from holding Daewoo SBI SPAC or generate 19.38% return on investment over 90 days.

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

Hanjin Transportation Co  vs.  Daewoo SBI SPAC

Hanjin Transportation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hanjin Transportation Co are ranked lower than 5 (%) 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.

Daewoo SBI SPAC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daewoo SBI SPAC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daewoo SBI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hanjin Transportation and Daewoo SBI

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

The idea behind Hanjin Transportation Co and Daewoo SBI SPAC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.