Correlation Between Moonbae Steel and Han Kook

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

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

Diversification Opportunities for Moonbae Steel and Han Kook

0.43

Correlation Coefficient

Moonbae Steel  Han Kook

Very weak diversification

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

Pair Corralation between Moonbae Steel and Han Kook

Assuming the 90 days trading horizon Moonbae Steel is expected to under-perform the Han Kook. But the stock apears to be less risky and, when comparing its historical volatility, Moonbae Steel is 2.18 times less risky than Han Kook. The stock trades about -0.09 of its potential returns per unit of risk. The Han Kook Steel is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  186,400  in Han Kook Steel on September 21, 2024 and sell it today you would earn a total of  12,500  from holding Han Kook Steel or generate 6.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Moonbae Steel  vs.  Han Kook Steel

Moonbae Steel

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Moonbae Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Moonbae Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Han Kook Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Han Kook Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Han Kook may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Moonbae Steel and Han Kook

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

The idea behind Moonbae Steel and Han Kook Steel 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.