Correlation Between Eagon Industrial and Hankook Furniture

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

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

Diversification Opportunities for Eagon Industrial and Hankook Furniture

0.43

Correlation Coefficient

Eagon Industrial  Hankook Furniture

Very weak diversification

The 3 months correlation between Eagon and Hankook is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eagon Industrial Co and Hankook Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Furniture and Eagon Industrial 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 Eagon Industrial Co are associated (or correlated) with Hankook Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Furniture has no effect on the direction of Eagon Industrial i.e., Eagon Industrial and Hankook Furniture go up and down completely randomly.

Pair Corralation between Eagon Industrial and Hankook Furniture

Assuming the 90 days trading horizon Eagon Industrial Co is expected to under-perform the Hankook Furniture. In addition to that, Eagon Industrial is 1.72 times more volatile than Hankook Furniture Co. It trades about -0.01 of its total potential returns per unit of risk. Hankook Furniture Co is currently generating about 0.0 per unit of volatility. If you would invest  418,833  in Hankook Furniture Co on October 24, 2024 and sell it today you would lose (15,333) from holding Hankook Furniture Co or give up 3.66% of portfolio value over 90 days.

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

Eagon Industrial Co  vs.  Hankook Furniture Co

Eagon Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eagon Industrial Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eagon Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Eagon Industrial and Hankook Furniture

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

The idea behind Eagon Industrial Co and Hankook Furniture 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.