Correlation Between Hanwha Solutions and Dongwha Enterprise

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

By analyzing existing cross correlation between Hanwha Solutions and Dongwha Enterprise CoLtd, you can compare the effects of market volatilities on Hanwha Solutions and Dongwha Enterprise 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 Dongwha Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanwha Solutions and Dongwha Enterprise.

Diversification Opportunities for Hanwha Solutions and Dongwha Enterprise

0.27

Correlation Coefficient

Hanwha Solutions  Dongwha Enterprise

Modest diversification

The 3 months correlation between Hanwha and Dongwha is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hanwha Solutions and Dongwha Enterprise CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwha Enterprise CoLtd 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 Dongwha Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwha Enterprise CoLtd has no effect on the direction of Hanwha Solutions i.e., Hanwha Solutions and Dongwha Enterprise go up and down completely randomly.

Pair Corralation between Hanwha Solutions and Dongwha Enterprise

Assuming the 90 days trading horizon Hanwha Solutions is expected to generate 0.69 times more return on investment than Dongwha Enterprise. However, Hanwha Solutions is 1.44 times less risky than Dongwha Enterprise. It trades about 0.13 of its potential returns per unit of risk. Dongwha Enterprise CoLtd is currently generating about 0.07 per unit of risk. If you would invest  1,566,000  in Hanwha Solutions on December 25, 2024 and sell it today you would earn a total of  424,000  from holding Hanwha Solutions or generate 27.08% return on investment over 90 days.

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

Hanwha Solutions  vs.  Dongwha Enterprise CoLtd

Hanwha Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hanwha Solutions are ranked lower than 10 (%) 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.

Dongwha Enterprise CoLtd

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dongwha Enterprise CoLtd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongwha Enterprise sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanwha Solutions and Dongwha Enterprise

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

The idea behind Hanwha Solutions and Dongwha Enterprise CoLtd 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.