Correlation Between Korean Reinsurance and Han Kook

Can any of the company-specific risk be diversified away by investing in both Korean Reinsurance and Han Kook 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 Korean Reinsurance and Han Kook into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Korean Reinsurance Co and Han Kook Capital, you can compare the effects of market volatilities on Korean Reinsurance and Han Kook 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 Korean Reinsurance with a short position of Han Kook. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Reinsurance and Han Kook.

Diversification Opportunities for Korean Reinsurance and Han Kook

-0.38

Correlation Coefficient

Korean Reinsurance  Han Kook

Very good diversification

The 3 months correlation between Korean and Han is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Korean Reinsurance Co and Han Kook Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Han Kook Capital and Korean Reinsurance 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 Korean Reinsurance Co are associated (or correlated) with Han Kook. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Han Kook Capital has no effect on the direction of Korean Reinsurance i.e., Korean Reinsurance and Han Kook go up and down completely randomly.

Pair Corralation between Korean Reinsurance and Han Kook

Assuming the 90 days trading horizon Korean Reinsurance is expected to generate 3.33 times less return on investment than Han Kook. In addition to that, Korean Reinsurance is 1.07 times more volatile than Han Kook Capital. It trades about 0.08 of its total potential returns per unit of risk. Han Kook Capital is currently generating about 0.29 per unit of volatility. If you would invest  50,060  in Han Kook Capital on October 10, 2024 and sell it today you would earn a total of  3,940  from holding Han Kook Capital or generate 7.87% return on investment over 90 days.

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

Korean Reinsurance Co  vs.  Han Kook Capital

Korean Reinsurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korean Reinsurance Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korean Reinsurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Han Kook Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Han Kook Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Han Kook is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Korean Reinsurance and Han Kook

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

The idea behind Korean Reinsurance Co and Han Kook Capital 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.