Correlation Between Kyeryong Construction and Hankuk Steel

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

By analyzing existing cross correlation between Kyeryong Construction Industrial and Hankuk Steel Wire, you can compare the effects of market volatilities on Kyeryong Construction and Hankuk Steel 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 Kyeryong Construction with a short position of Hankuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kyeryong Construction and Hankuk Steel.

Diversification Opportunities for Kyeryong Construction and Hankuk Steel

-0.35

Correlation Coefficient

Kyeryong Construction  Hankuk Steel

Very good diversification

The 3 months correlation between Kyeryong and Hankuk is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Kyeryong Construction Industri and Hankuk Steel Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankuk Steel Wire and Kyeryong Construction 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 Kyeryong Construction Industrial are associated (or correlated) with Hankuk Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankuk Steel Wire has no effect on the direction of Kyeryong Construction i.e., Kyeryong Construction and Hankuk Steel go up and down completely randomly.

Pair Corralation between Kyeryong Construction and Hankuk Steel

Assuming the 90 days trading horizon Kyeryong Construction is expected to generate 3.6 times less return on investment than Hankuk Steel. But when comparing it to its historical volatility, Kyeryong Construction Industrial is 3.28 times less risky than Hankuk Steel. It trades about 0.08 of its potential returns per unit of risk. Hankuk Steel Wire is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  380,000  in Hankuk Steel Wire on October 11, 2024 and sell it today you would earn a total of  27,000  from holding Hankuk Steel Wire or generate 7.11% return on investment over 90 days.

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

Kyeryong Construction Industri  vs.  Hankuk Steel Wire

Kyeryong Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kyeryong Construction Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hankuk Steel Wire

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Kyeryong Construction and Hankuk Steel

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

The idea behind Kyeryong Construction Industrial and Hankuk Steel Wire 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.