Correlation Between Hankook Furniture and ECSTELECOM

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

Diversification Opportunities for Hankook Furniture and ECSTELECOM

0.0

Correlation Coefficient

Hankook Furniture  ECSTELECOM

Pay attention - limited upside

The 3 months correlation between Hankook and ECSTELECOM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Furniture Co and ECSTELECOM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECSTELECOM 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 ECSTELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECSTELECOM has no effect on the direction of Hankook Furniture i.e., Hankook Furniture and ECSTELECOM go up and down completely randomly.

Pair Corralation between Hankook Furniture and ECSTELECOM

Assuming the 90 days trading horizon Hankook Furniture Co is expected to generate 0.88 times more return on investment than ECSTELECOM. However, Hankook Furniture Co is 1.14 times less risky than ECSTELECOM. It trades about 0.02 of its potential returns per unit of risk. ECSTELECOM Co is currently generating about -0.05 per unit of risk. If you would invest  387,962  in Hankook Furniture Co on September 4, 2024 and sell it today you would earn a total of  20,038  from holding Hankook Furniture Co or generate 5.16% return on investment over 90 days.

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

Hankook Furniture Co  vs.  ECSTELECOM Co

Hankook Furniture

Risk-Adjusted Performance

12 of 100

Good

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

ECSTELECOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECSTELECOM Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ECSTELECOM 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 ECSTELECOM

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

The idea behind Hankook Furniture Co and ECSTELECOM 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.