Correlation Between Youngsin Metal and Hankook Steel

Can any of the company-specific risk be diversified away by investing in both Youngsin Metal and Hankook Steel 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 Youngsin Metal and Hankook Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Youngsin Metal Industrial and Hankook Steel Co, you can compare the effects of market volatilities on Youngsin Metal and Hankook Steel 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 Youngsin Metal with a short position of Hankook Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Youngsin Metal and Hankook Steel.

Diversification Opportunities for Youngsin Metal and Hankook Steel

0.1

Correlation Coefficient

Youngsin Metal  Hankook Steel

Average diversification

The 3 months correlation between Youngsin and Hankook is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Youngsin Metal Industrial and Hankook Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Steel and Youngsin Metal 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 Youngsin Metal Industrial are associated (or correlated) with Hankook Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Steel has no effect on the direction of Youngsin Metal i.e., Youngsin Metal and Hankook Steel go up and down completely randomly.

Pair Corralation between Youngsin Metal and Hankook Steel

Assuming the 90 days trading horizon Youngsin Metal Industrial is expected to generate 1.27 times more return on investment than Hankook Steel. However, Youngsin Metal is 1.27 times more volatile than Hankook Steel Co. It trades about 0.14 of its potential returns per unit of risk. Hankook Steel Co is currently generating about -0.18 per unit of risk. If you would invest  218,000  in Youngsin Metal Industrial on September 30, 2024 and sell it today you would earn a total of  25,000  from holding Youngsin Metal Industrial or generate 11.47% return on investment over 90 days.

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

Youngsin Metal Industrial  vs.  Hankook Steel Co

Youngsin Metal Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hankook Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Youngsin Metal and Hankook Steel

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

The idea behind Youngsin Metal Industrial and Hankook Steel 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.