Correlation Between Korea Refractories and Hankook Furniture

Can any of the company-specific risk be diversified away by investing in both Korea Refractories and Hankook Furniture 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 Korea Refractories and Hankook Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Korea Refractories and Hankook Furniture

-0.47

Correlation Coefficient

Korea Refractories  Hankook Furniture

Very good diversification

The 3 months correlation between Korea and Hankook is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Korea Refractories Co and Hankook Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Furniture and Korea Refractories 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 Korea Refractories Co are associated (or correlated) with Hankook Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Furniture has no effect on the direction of Korea Refractories i.e., Korea Refractories and Hankook Furniture go up and down completely randomly.

Pair Corralation between Korea Refractories and Hankook Furniture

Assuming the 90 days trading horizon Korea Refractories Co is expected to under-perform the Hankook Furniture. In addition to that, Korea Refractories is 1.16 times more volatile than Hankook Furniture Co. It trades about -0.01 of its total potential returns per unit of risk. Hankook Furniture Co is currently generating about 0.16 per unit of volatility. If you would invest  361,575  in Hankook Furniture Co on September 4, 2024 and sell it today you would earn a total of  46,425  from holding Hankook Furniture Co or generate 12.84% return on investment over 90 days.

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

Korea Refractories Co  vs.  Hankook Furniture Co

Korea Refractories

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hankook Furniture

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hankook Furniture Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hankook Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Korea Refractories and Hankook Furniture

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

The idea behind Korea Refractories Co and Hankook Furniture 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.