Correlation Between Hansol Chemica and Korean Reinsurance

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

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

Diversification Opportunities for Hansol Chemica and Korean Reinsurance

0.05

Correlation Coefficient

Hansol Chemica  Korean Reinsurance

Significant diversification

The 3 months correlation between Hansol and Korean is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hansol Chemica and Korean Reinsurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Reinsurance and Hansol Chemica 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 Hansol Chemica are associated (or correlated) with Korean Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Reinsurance has no effect on the direction of Hansol Chemica i.e., Hansol Chemica and Korean Reinsurance go up and down completely randomly.

Pair Corralation between Hansol Chemica and Korean Reinsurance

Assuming the 90 days trading horizon Hansol Chemica is expected to generate 2.81 times more return on investment than Korean Reinsurance. However, Hansol Chemica is 2.81 times more volatile than Korean Reinsurance Co. It trades about 0.19 of its potential returns per unit of risk. Korean Reinsurance Co is currently generating about -0.02 per unit of risk. If you would invest  9,730,734  in Hansol Chemica on December 24, 2024 and sell it today you would earn a total of  3,659,266  from holding Hansol Chemica or generate 37.61% return on investment over 90 days.

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

Hansol Chemica  vs.  Korean Reinsurance Co

Hansol Chemica

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hansol Chemica are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hansol Chemica sustained solid returns over the last few months and may actually be approaching a breakup point.

Korean Reinsurance

Risk-Adjusted Performance

Weak

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

Pair Trading with Hansol Chemica and Korean Reinsurance

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

The idea behind Hansol Chemica and Korean Reinsurance 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.