Correlation Between Eagon Industrial and Hankuk Steel

Can any of the company-specific risk be diversified away by investing in both Eagon Industrial and Hankuk 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 Eagon Industrial and Hankuk Steel 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 Hankuk Steel Wire, you can compare the effects of market volatilities on Eagon Industrial and Hankuk 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 Eagon Industrial with a short position of Hankuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagon Industrial and Hankuk Steel.

Diversification Opportunities for Eagon Industrial and Hankuk Steel

0.82

Correlation Coefficient

Eagon Industrial  Hankuk Steel

Very poor diversification

The 3 months correlation between Eagon and Hankuk is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Eagon Industrial Co and Hankuk Steel Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankuk Steel Wire 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 Hankuk Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankuk Steel Wire has no effect on the direction of Eagon Industrial i.e., Eagon Industrial and Hankuk Steel go up and down completely randomly.

Pair Corralation between Eagon Industrial and Hankuk Steel

Assuming the 90 days trading horizon Eagon Industrial Co is expected to under-perform the Hankuk Steel. But the stock apears to be less risky and, when comparing its historical volatility, Eagon Industrial Co is 1.33 times less risky than Hankuk Steel. The stock trades about -0.03 of its potential returns per unit of risk. The Hankuk Steel Wire is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  411,854  in Hankuk Steel Wire on October 10, 2024 and sell it today you would lose (5,354) from holding Hankuk Steel Wire or give up 1.3% of portfolio value over 90 days.

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

Eagon Industrial Co  vs.  Hankuk Steel Wire

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 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hankuk Steel Wire

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hankuk Steel Wire are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hankuk Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagon Industrial and Hankuk Steel

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

The idea behind Eagon Industrial Co and Hankuk Steel Wire 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.