Correlation Between Hanwha Aerospace and FNSTech

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

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

Diversification Opportunities for Hanwha Aerospace and FNSTech

0.8

Correlation Coefficient

Hanwha Aerospace  FNSTech

Very poor diversification

The 3 months correlation between Hanwha and FNSTech is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hanwha Aerospace Co and FNSTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNSTech and Hanwha Aerospace 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 Aerospace Co are associated (or correlated) with FNSTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNSTech has no effect on the direction of Hanwha Aerospace i.e., Hanwha Aerospace and FNSTech go up and down completely randomly.

Pair Corralation between Hanwha Aerospace and FNSTech

Assuming the 90 days trading horizon Hanwha Aerospace Co is expected to generate 1.09 times more return on investment than FNSTech. However, Hanwha Aerospace is 1.09 times more volatile than FNSTech Co. It trades about 0.32 of its potential returns per unit of risk. FNSTech Co is currently generating about 0.11 per unit of risk. If you would invest  30,911,900  in Hanwha Aerospace Co on November 29, 2024 and sell it today you would earn a total of  36,288,100  from holding Hanwha Aerospace Co or generate 117.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Hanwha Aerospace Co  vs.  FNSTech Co

Hanwha Aerospace

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hanwha Aerospace Co are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hanwha Aerospace sustained solid returns over the last few months and may actually be approaching a breakup point.

FNSTech

Risk-Adjusted Performance

OK

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

Pair Trading with Hanwha Aerospace and FNSTech

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

The idea behind Hanwha Aerospace Co and FNSTech 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.