Correlation Between GS Retail and Hanjin Transportation

Can any of the company-specific risk be diversified away by investing in both GS Retail and Hanjin Transportation 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 GS Retail and Hanjin Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for GS Retail and Hanjin Transportation

-0.83

Correlation Coefficient

GS Retail  Hanjin Transportation

Pay attention - limited upside

The 3 months correlation between 007070 and Hanjin is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding GS Retail Co and Hanjin Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjin Transportation and GS Retail 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 GS Retail Co are associated (or correlated) with Hanjin Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjin Transportation has no effect on the direction of GS Retail i.e., GS Retail and Hanjin Transportation go up and down completely randomly.

Pair Corralation between GS Retail and Hanjin Transportation

Assuming the 90 days trading horizon GS Retail Co is expected to under-perform the Hanjin Transportation. In addition to that, GS Retail is 2.45 times more volatile than Hanjin Transportation Co. It trades about -0.12 of its total potential returns per unit of risk. Hanjin Transportation Co is currently generating about 0.05 per unit of volatility. If you would invest  1,917,000  in Hanjin Transportation Co on December 25, 2024 and sell it today you would earn a total of  34,000  from holding Hanjin Transportation Co or generate 1.77% return on investment over 90 days.

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

GS Retail Co  vs.  Hanjin Transportation Co

GS Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days GS Retail Co 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.

Hanjin Transportation

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hanjin Transportation Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hanjin Transportation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GS Retail and Hanjin Transportation

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

The idea behind GS Retail Co and Hanjin Transportation 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.