Correlation Between Hankook Furniture and Han Kook

Can any of the company-specific risk be diversified away by investing in both Hankook Furniture 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 Hankook Furniture and Han Kook 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 Han Kook Capital, you can compare the effects of market volatilities on Hankook Furniture 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 Hankook Furniture with a short position of Han Kook. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankook Furniture and Han Kook.

Diversification Opportunities for Hankook Furniture and Han Kook

0.05

Correlation Coefficient

Hankook Furniture  Han Kook

Significant diversification

The 3 months correlation between Hankook and Han is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Furniture 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 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 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 Hankook Furniture i.e., Hankook Furniture and Han Kook go up and down completely randomly.

Pair Corralation between Hankook Furniture and Han Kook

Assuming the 90 days trading horizon Hankook Furniture Co is expected to generate 1.46 times more return on investment than Han Kook. However, Hankook Furniture is 1.46 times more volatile than Han Kook Capital. It trades about 0.19 of its potential returns per unit of risk. Han Kook Capital is currently generating about 0.06 per unit of risk. If you would invest  355,373  in Hankook Furniture Co on October 9, 2024 and sell it today you would earn a total of  51,127  from holding Hankook Furniture Co or generate 14.39% return on investment over 90 days.

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

Hankook Furniture Co  vs.  Han Kook Capital

Hankook Furniture

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hankook Furniture Co are ranked lower than 9 (%) 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.

Han Kook Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Han Kook Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Hankook Furniture and Han Kook

The main advantage of trading using opposite Hankook Furniture and Han Kook positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankook Furniture 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 Hankook Furniture 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.