Correlation Between Han Kook and Hyundai Home

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

By analyzing existing cross correlation between Han Kook Capital and Hyundai Home Shopping, you can compare the effects of market volatilities on Han Kook and Hyundai Home 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 Han Kook with a short position of Hyundai Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Han Kook and Hyundai Home.

Diversification Opportunities for Han Kook and Hyundai Home

0.61

Correlation Coefficient

Han Kook  Hyundai Home

Poor diversification

The 3 months correlation between Han and Hyundai is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Han Kook Capital and Hyundai Home Shopping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Home Shopping and Han Kook 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 Han Kook Capital are associated (or correlated) with Hyundai Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Home Shopping has no effect on the direction of Han Kook i.e., Han Kook and Hyundai Home go up and down completely randomly.

Pair Corralation between Han Kook and Hyundai Home

Assuming the 90 days trading horizon Han Kook Capital is expected to under-perform the Hyundai Home. But the stock apears to be less risky and, when comparing its historical volatility, Han Kook Capital is 1.23 times less risky than Hyundai Home. The stock trades about 0.0 of its potential returns per unit of risk. The Hyundai Home Shopping is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,343,009  in Hyundai Home Shopping on September 4, 2024 and sell it today you would earn a total of  246,991  from holding Hyundai Home Shopping or generate 5.69% return on investment over 90 days.

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

Han Kook Capital  vs.  Hyundai Home Shopping

Han Kook Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hyundai Home Shopping

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Han Kook and Hyundai Home

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

The idea behind Han Kook Capital and Hyundai Home Shopping 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.