Correlation Between Hanwha Chemical and Shinil Industrial

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

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

Diversification Opportunities for Hanwha Chemical and Shinil Industrial

0.25

Correlation Coefficient

Hanwha Chemical  Shinil Industrial

Modest diversification

The 3 months correlation between Hanwha and Shinil is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Hanwha Chemical Corp and Shinil Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinil Industrial and Hanwha Chemical 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 Chemical Corp are associated (or correlated) with Shinil Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinil Industrial has no effect on the direction of Hanwha Chemical i.e., Hanwha Chemical and Shinil Industrial go up and down completely randomly.

Pair Corralation between Hanwha Chemical and Shinil Industrial

Assuming the 90 days trading horizon Hanwha Chemical Corp is expected to generate 8.33 times more return on investment than Shinil Industrial. However, Hanwha Chemical is 8.33 times more volatile than Shinil Industrial Co. It trades about 0.37 of its potential returns per unit of risk. Shinil Industrial Co is currently generating about -0.14 per unit of risk. If you would invest  1,546,376  in Hanwha Chemical Corp on October 23, 2024 and sell it today you would earn a total of  518,624  from holding Hanwha Chemical Corp or generate 33.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Hanwha Chemical Corp  vs.  Shinil Industrial Co

Hanwha Chemical Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hanwha Chemical Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hanwha Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shinil Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinil Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinil Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hanwha Chemical and Shinil Industrial

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

The idea behind Hanwha Chemical Corp and Shinil Industrial 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.