Correlation Between Hanwha Solutions and Dongjin Semichem

Can any of the company-specific risk be diversified away by investing in both Hanwha Solutions and Dongjin Semichem 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 Hanwha Solutions and Dongjin Semichem into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Hanwha Solutions and Dongjin Semichem

0.72

Correlation Coefficient

Hanwha Solutions  Dongjin Semichem

Poor diversification

The 3 months correlation between Hanwha and Dongjin is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hanwha Solutions and Dongjin Semichem Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongjin Semichem and Hanwha Solutions 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 Hanwha Solutions are associated (or correlated) with Dongjin Semichem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongjin Semichem has no effect on the direction of Hanwha Solutions i.e., Hanwha Solutions and Dongjin Semichem go up and down completely randomly.

Pair Corralation between Hanwha Solutions and Dongjin Semichem

Assuming the 90 days trading horizon Hanwha Solutions is expected to generate 1.27 times more return on investment than Dongjin Semichem. However, Hanwha Solutions is 1.27 times more volatile than Dongjin Semichem Co. It trades about 0.14 of its potential returns per unit of risk. Dongjin Semichem Co is currently generating about 0.12 per unit of risk. If you would invest  1,608,192  in Hanwha Solutions on December 1, 2024 and sell it today you would earn a total of  541,808  from holding Hanwha Solutions or generate 33.69% return on investment over 90 days.

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

Hanwha Solutions  vs.  Dongjin Semichem Co

Hanwha Solutions

Risk-Adjusted Performance

Good

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

Dongjin Semichem

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dongjin Semichem Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongjin Semichem sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanwha Solutions and Dongjin Semichem

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

The idea behind Hanwha Solutions and Dongjin Semichem 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.