Correlation Between Jeju Bank and Hanwha Life

Can any of the company-specific risk be diversified away by investing in both Jeju Bank and Hanwha Life 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 Jeju Bank and Hanwha Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jeju Bank and Hanwha Life Insurance, you can compare the effects of market volatilities on Jeju Bank and Hanwha Life 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 Jeju Bank with a short position of Hanwha Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Bank and Hanwha Life.

Diversification Opportunities for Jeju Bank and Hanwha Life

0.39

Correlation Coefficient

Jeju Bank  Hanwha Life

Weak diversification

The 3 months correlation between Jeju and Hanwha is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Bank and Hanwha Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Life Insurance and Jeju Bank 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 Jeju Bank are associated (or correlated) with Hanwha Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Life Insurance has no effect on the direction of Jeju Bank i.e., Jeju Bank and Hanwha Life go up and down completely randomly.

Pair Corralation between Jeju Bank and Hanwha Life

Assuming the 90 days trading horizon Jeju Bank is expected to generate 1.34 times more return on investment than Hanwha Life. However, Jeju Bank is 1.34 times more volatile than Hanwha Life Insurance. It trades about 0.01 of its potential returns per unit of risk. Hanwha Life Insurance is currently generating about -0.1 per unit of risk. If you would invest  810,000  in Jeju Bank on October 24, 2024 and sell it today you would lose (1,000.00) from holding Jeju Bank or give up 0.12% of portfolio value over 90 days.

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

Jeju Bank  vs.  Hanwha Life Insurance

Jeju Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hanwha Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanwha Life Insurance 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 Jeju Bank and Hanwha Life

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

The idea behind Jeju Bank and Hanwha Life Insurance 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 Transaction History module to view history of all your transactions and understand their impact on performance.