Correlation Between Hankook Furniture and POSCO Holdings

Can any of the company-specific risk be diversified away by investing in both Hankook Furniture and POSCO Holdings 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 Hankook Furniture and POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hankook Furniture Co and POSCO Holdings, you can compare the effects of market volatilities on Hankook Furniture and POSCO Holdings 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 Hankook Furniture with a short position of POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankook Furniture and POSCO Holdings.

Diversification Opportunities for Hankook Furniture and POSCO Holdings

-0.76

Correlation Coefficient

Hankook Furniture  POSCO Holdings

Pay attention - limited upside

The 3 months correlation between Hankook and POSCO is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Furniture Co and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Hankook Furniture 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 Hankook Furniture Co are associated (or correlated) with POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Hankook Furniture i.e., Hankook Furniture and POSCO Holdings go up and down completely randomly.

Pair Corralation between Hankook Furniture and POSCO Holdings

Assuming the 90 days trading horizon Hankook Furniture Co is expected to generate 0.69 times more return on investment than POSCO Holdings. However, Hankook Furniture Co is 1.45 times less risky than POSCO Holdings. It trades about 0.14 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.1 per unit of risk. If you would invest  387,240  in Hankook Furniture Co on October 5, 2024 and sell it today you would earn a total of  17,260  from holding Hankook Furniture Co or generate 4.46% return on investment over 90 days.

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

Hankook Furniture Co  vs.  POSCO Holdings

Hankook Furniture

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hankook Furniture Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hankook Furniture may actually be approaching a critical reversion point that can send shares even higher in February 2025.

POSCO Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POSCO Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hankook Furniture and POSCO Holdings

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

The idea behind Hankook Furniture Co and POSCO Holdings 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.