Correlation Between Hwasung Industrial and Kyung Chang

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

Diversification Opportunities for Hwasung Industrial and Kyung Chang

-0.17

Correlation Coefficient

Hwasung Industrial  Kyung Chang

Good diversification

The 3 months correlation between Hwasung and Kyung is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hwasung Industrial Co and Kyung Chang Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyung Chang 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 Kyung Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyung Chang Industrial has no effect on the direction of Hwasung Industrial i.e., Hwasung Industrial and Kyung Chang go up and down completely randomly.

Pair Corralation between Hwasung Industrial and Kyung Chang

Assuming the 90 days trading horizon Hwasung Industrial is expected to generate 1.3 times less return on investment than Kyung Chang. But when comparing it to its historical volatility, Hwasung Industrial Co is 2.1 times less risky than Kyung Chang. It trades about 0.24 of its potential returns per unit of risk. Kyung Chang Industrial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  192,900  in Kyung Chang Industrial on October 23, 2024 and sell it today you would earn a total of  12,100  from holding Kyung Chang Industrial or generate 6.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Hwasung Industrial Co  vs.  Kyung Chang Industrial

Hwasung Industrial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hwasung Industrial Co are ranked lower than 10 (%) 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.

Kyung Chang Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kyung Chang Industrial 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 Kyung Chang

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

The idea behind Hwasung Industrial Co and Kyung Chang Industrial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.