Correlation Between Automobile and Hana Materials
Can any of the company-specific risk be diversified away by investing in both Automobile and Hana Materials 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 Automobile and Hana Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automobile Pc and Hana Materials, you can compare the effects of market volatilities on Automobile and Hana Materials 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 Automobile with a short position of Hana Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automobile and Hana Materials.
Diversification Opportunities for Automobile and Hana Materials
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Automobile and Hana is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc and Hana Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hana Materials and Automobile 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 Automobile Pc are associated (or correlated) with Hana Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hana Materials has no effect on the direction of Automobile i.e., Automobile and Hana Materials go up and down completely randomly.
Pair Corralation between Automobile and Hana Materials
Assuming the 90 days trading horizon Automobile Pc is expected to under-perform the Hana Materials. But the stock apears to be less risky and, when comparing its historical volatility, Automobile Pc is 1.45 times less risky than Hana Materials. The stock trades about -0.21 of its potential returns per unit of risk. The Hana Materials is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,385,000 in Hana Materials on October 23, 2024 and sell it today you would earn a total of 285,000 from holding Hana Materials or generate 11.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Automobile Pc vs. Hana Materials
Performance |
Timeline |
Automobile Pc |
Hana Materials |
Automobile and Hana Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Automobile and Hana Materials
The main advantage of trading using opposite Automobile and Hana Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automobile position performs unexpectedly, Hana Materials 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 Hana Materials will offset losses from the drop in Hana Materials' long position.Automobile vs. Kisan Telecom Co | Automobile vs. Youngchang Chemical Co | Automobile vs. JC Chemical Co | Automobile vs. Hanwha Chemical Corp |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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