Correlation Between Kbi Metal and Hanwha Solutions

Can any of the company-specific risk be diversified away by investing in both Kbi Metal and Hanwha Solutions 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 Kbi Metal and Hanwha Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kbi Metal and Hanwha Solutions

0.71

Correlation Coefficient

Kbi Metal  Hanwha Solutions

Poor diversification

The 3 months correlation between Kbi and Hanwha is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kbi Metal Co and Hanwha Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Solutions and Kbi Metal 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 Kbi Metal Co are associated (or correlated) with Hanwha Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Solutions has no effect on the direction of Kbi Metal i.e., Kbi Metal and Hanwha Solutions go up and down completely randomly.

Pair Corralation between Kbi Metal and Hanwha Solutions

Assuming the 90 days trading horizon Kbi Metal Co is expected to under-perform the Hanwha Solutions. In addition to that, Kbi Metal is 1.2 times more volatile than Hanwha Solutions. It trades about -0.17 of its total potential returns per unit of risk. Hanwha Solutions is currently generating about -0.19 per unit of volatility. If you would invest  2,460,000  in Hanwha Solutions on October 4, 2024 and sell it today you would lose (845,000) from holding Hanwha Solutions or give up 34.35% of portfolio value over 90 days.

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

Kbi Metal Co  vs.  Hanwha Solutions

Kbi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kbi Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hanwha Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanwha Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kbi Metal and Hanwha Solutions

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

The idea behind Kbi Metal Co and Hanwha Solutions 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.