Correlation Between Hanjin Transportation and Seah Steel

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

Diversification Opportunities for Hanjin Transportation and Seah Steel

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Hanjin and Seah is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hanjin Transportation Co and Seah Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seah Steel Corp 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 Seah Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seah Steel Corp has no effect on the direction of Hanjin Transportation i.e., Hanjin Transportation and Seah Steel go up and down completely randomly.

Pair Corralation between Hanjin Transportation and Seah Steel

Assuming the 90 days trading horizon Hanjin Transportation Co is expected to generate 0.59 times more return on investment than Seah Steel. However, Hanjin Transportation Co is 1.7 times less risky than Seah Steel. It trades about 0.57 of its potential returns per unit of risk. Seah Steel Corp is currently generating about 0.05 per unit of risk. If you would invest  1,789,976  in Hanjin Transportation Co on October 11, 2024 and sell it today you would earn a total of  164,024  from holding Hanjin Transportation Co or generate 9.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Hanjin Transportation Co  vs.  Seah Steel Corp

 Performance 
       Timeline  
Hanjin Transportation 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
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.
Seah Steel Corp 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Seah Steel Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Seah Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanjin Transportation and Seah Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hanjin Transportation and Seah Steel

The main advantage of trading using opposite Hanjin Transportation and Seah Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanjin Transportation position performs unexpectedly, Seah Steel 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 Seah Steel will offset losses from the drop in Seah Steel's long position.
The idea behind Hanjin Transportation Co and Seah Steel Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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