Correlation Between Hanwha InvestmentSecuri and Daejoo Electronic

Can any of the company-specific risk be diversified away by investing in both Hanwha InvestmentSecuri and Daejoo Electronic 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 Hanwha InvestmentSecuri and Daejoo Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hanwha InvestmentSecurities Co and Daejoo Electronic Materials, you can compare the effects of market volatilities on Hanwha InvestmentSecuri and Daejoo Electronic 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 Hanwha InvestmentSecuri with a short position of Daejoo Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanwha InvestmentSecuri and Daejoo Electronic.

Diversification Opportunities for Hanwha InvestmentSecuri and Daejoo Electronic

-0.6

Correlation Coefficient

Hanwha InvestmentSecuri  Daejoo Electronic

Excellent diversification

The 3 months correlation between Hanwha and Daejoo is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hanwha InvestmentSecurities Co and Daejoo Electronic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejoo Electronic and Hanwha InvestmentSecuri 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 Hanwha InvestmentSecurities Co are associated (or correlated) with Daejoo Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejoo Electronic has no effect on the direction of Hanwha InvestmentSecuri i.e., Hanwha InvestmentSecuri and Daejoo Electronic go up and down completely randomly.

Pair Corralation between Hanwha InvestmentSecuri and Daejoo Electronic

Assuming the 90 days trading horizon Hanwha InvestmentSecurities Co is expected to generate 1.14 times more return on investment than Daejoo Electronic. However, Hanwha InvestmentSecuri is 1.14 times more volatile than Daejoo Electronic Materials. It trades about 0.05 of its potential returns per unit of risk. Daejoo Electronic Materials is currently generating about 0.01 per unit of risk. If you would invest  247,000  in Hanwha InvestmentSecurities Co on September 12, 2024 and sell it today you would earn a total of  123,500  from holding Hanwha InvestmentSecurities Co or generate 50.0% return on investment over 90 days.

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

Hanwha InvestmentSecurities Co  vs.  Daejoo Electronic Materials

Hanwha InvestmentSecuri

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hanwha InvestmentSecurities Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hanwha InvestmentSecuri sustained solid returns over the last few months and may actually be approaching a breakup point.

Daejoo Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daejoo Electronic Materials 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 Hanwha InvestmentSecuri and Daejoo Electronic

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

The idea behind Hanwha InvestmentSecurities Co and Daejoo Electronic Materials 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.