Correlation Between Hwasung Industrial and Daehan Synthetic

Can any of the company-specific risk be diversified away by investing in both Hwasung Industrial and Daehan Synthetic 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 Hwasung Industrial and Daehan Synthetic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hwasung Industrial Co and Daehan Synthetic Fiber, you can compare the effects of market volatilities on Hwasung Industrial and Daehan Synthetic 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 Hwasung Industrial with a short position of Daehan Synthetic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwasung Industrial and Daehan Synthetic.

Diversification Opportunities for Hwasung Industrial and Daehan Synthetic

-0.81

Correlation Coefficient

Hwasung Industrial  Daehan Synthetic

Pay attention - limited upside

The 3 months correlation between Hwasung and Daehan is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hwasung Industrial Co and Daehan Synthetic Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daehan Synthetic Fiber and Hwasung Industrial 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 Hwasung Industrial Co are associated (or correlated) with Daehan Synthetic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daehan Synthetic Fiber has no effect on the direction of Hwasung Industrial i.e., Hwasung Industrial and Daehan Synthetic go up and down completely randomly.

Pair Corralation between Hwasung Industrial and Daehan Synthetic

Assuming the 90 days trading horizon Hwasung Industrial Co is expected to generate 0.94 times more return on investment than Daehan Synthetic. However, Hwasung Industrial Co is 1.06 times less risky than Daehan Synthetic. It trades about 0.23 of its potential returns per unit of risk. Daehan Synthetic Fiber is currently generating about -0.12 per unit of risk. If you would invest  948,150  in Hwasung Industrial Co on October 24, 2024 and sell it today you would earn a total of  48,850  from holding Hwasung Industrial Co or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Hwasung Industrial Co  vs.  Daehan Synthetic Fiber

Hwasung Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hwasung Industrial Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hwasung Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Daehan Synthetic Fiber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daehan Synthetic Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hwasung Industrial and Daehan Synthetic

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

The idea behind Hwasung Industrial Co and Daehan Synthetic Fiber 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.