Correlation Between Hankook Furniture and AptaBio Therapeutics

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

Diversification Opportunities for Hankook Furniture and AptaBio Therapeutics

-0.6

Correlation Coefficient

Hankook Furniture  AptaBio Therapeutics

Excellent diversification

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

Pair Corralation between Hankook Furniture and AptaBio Therapeutics

Assuming the 90 days trading horizon Hankook Furniture is expected to generate 3.49 times less return on investment than AptaBio Therapeutics. But when comparing it to its historical volatility, Hankook Furniture Co is 5.11 times less risky than AptaBio Therapeutics. It trades about 0.29 of its potential returns per unit of risk. AptaBio Therapeutics is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  630,000  in AptaBio Therapeutics on October 24, 2024 and sell it today you would earn a total of  73,000  from holding AptaBio Therapeutics or generate 11.59% 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.  AptaBio Therapeutics

Hankook Furniture

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hankook Furniture Co are ranked lower than 10 (%) 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.

AptaBio Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AptaBio Therapeutics 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 Hankook Furniture and AptaBio Therapeutics

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

The idea behind Hankook Furniture Co and AptaBio Therapeutics 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.