Correlation Between DB Financial and Hankook Furniture

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

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

Diversification Opportunities for DB Financial and Hankook Furniture

0.76

Correlation Coefficient

DB Financial  Hankook Furniture

Poor diversification

The 3 months correlation between 016610 and Hankook is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and Hankook Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Furniture and DB Financial 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 DB Financial Investment 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 DB Financial i.e., DB Financial and Hankook Furniture go up and down completely randomly.

Pair Corralation between DB Financial and Hankook Furniture

Assuming the 90 days trading horizon DB Financial Investment is expected to generate 0.69 times more return on investment than Hankook Furniture. However, DB Financial Investment is 1.45 times less risky than Hankook Furniture. It trades about 0.21 of its potential returns per unit of risk. Hankook Furniture Co is currently generating about 0.04 per unit of risk. If you would invest  520,000  in DB Financial Investment on December 27, 2024 and sell it today you would earn a total of  62,000  from holding DB Financial Investment or generate 11.92% return on investment over 90 days.

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

DB Financial Investment  vs.  Hankook Furniture Co

DB Financial Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DB Financial Investment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DB Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Hankook Furniture

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hankook Furniture Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hankook Furniture is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DB Financial and Hankook Furniture

The main advantage of trading using opposite DB Financial and Hankook Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DB Financial 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 DB Financial Investment 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.