Correlation Between Hwasung Industrial and Korea Ratings

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

Diversification Opportunities for Hwasung Industrial and Korea Ratings

0.63

Correlation Coefficient

Hwasung Industrial  Korea Ratings

Poor diversification

The 3 months correlation between Hwasung and Korea is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hwasung Industrial Co and Korea Ratings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Ratings 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 Korea Ratings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Ratings has no effect on the direction of Hwasung Industrial i.e., Hwasung Industrial and Korea Ratings go up and down completely randomly.

Pair Corralation between Hwasung Industrial and Korea Ratings

Assuming the 90 days trading horizon Hwasung Industrial Co is expected to generate 1.66 times more return on investment than Korea Ratings. However, Hwasung Industrial is 1.66 times more volatile than Korea Ratings Co. It trades about 0.11 of its potential returns per unit of risk. Korea Ratings Co is currently generating about 0.16 per unit of risk. If you would invest  951,000  in Hwasung Industrial Co on October 26, 2024 and sell it today you would earn a total of  24,000  from holding Hwasung Industrial Co or generate 2.52% return on investment over 90 days.

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

Hwasung Industrial Co  vs.  Korea Ratings 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.

Korea Ratings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Ratings Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Ratings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hwasung Industrial and Korea Ratings

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

The idea behind Hwasung Industrial Co and Korea Ratings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.