Correlation Between Hwasung Industrial and Songwon Industrial

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

Diversification Opportunities for Hwasung Industrial and Songwon Industrial

-0.36

Correlation Coefficient

Hwasung Industrial  Songwon Industrial

Very good diversification

The 3 months correlation between Hwasung and Songwon is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hwasung Industrial Co and Songwon Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Songwon Industrial 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 Songwon Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Songwon Industrial has no effect on the direction of Hwasung Industrial i.e., Hwasung Industrial and Songwon Industrial go up and down completely randomly.

Pair Corralation between Hwasung Industrial and Songwon Industrial

Assuming the 90 days trading horizon Hwasung Industrial Co is expected to generate 0.72 times more return on investment than Songwon Industrial. However, Hwasung Industrial Co is 1.39 times less risky than Songwon Industrial. It trades about 0.12 of its potential returns per unit of risk. Songwon Industrial Co is currently generating about -0.13 per unit of risk. If you would invest  905,398  in Hwasung Industrial Co on October 9, 2024 and sell it today you would earn a total of  79,602  from holding Hwasung Industrial Co or generate 8.79% return on investment over 90 days.

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

Hwasung Industrial Co  vs.  Songwon Industrial Co

Hwasung Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hwasung Industrial Co are ranked lower than 9 (%) 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.

Songwon Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Songwon Industrial Co 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 Songwon Industrial

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

The idea behind Hwasung Industrial Co and Songwon Industrial 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..