Correlation Between Hanjin Transportation and Ray

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

Diversification Opportunities for Hanjin Transportation and Ray

0.67

Correlation Coefficient

Hanjin Transportation  Ray

Poor diversification

The 3 months correlation between Hanjin and Ray is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hanjin Transportation Co and Ray Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ray Co 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 Ray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ray Co has no effect on the direction of Hanjin Transportation i.e., Hanjin Transportation and Ray go up and down completely randomly.

Pair Corralation between Hanjin Transportation and Ray

Assuming the 90 days trading horizon Hanjin Transportation is expected to generate 7.83 times less return on investment than Ray. But when comparing it to its historical volatility, Hanjin Transportation Co is 6.07 times less risky than Ray. It trades about 0.13 of its potential returns per unit of risk. Ray Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  592,000  in Ray Co on December 24, 2024 and sell it today you would earn a total of  237,000  from holding Ray Co or generate 40.03% 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.  Ray 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 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.

Ray Co

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ray Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ray sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanjin Transportation and Ray

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

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