Correlation Between Kyung Chang and Hwasung Industrial

Can any of the company-specific risk be diversified away by investing in both Kyung Chang and Hwasung Industrial 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 Kyung Chang and Hwasung Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kyung Chang and Hwasung Industrial

-0.17

Correlation Coefficient

Kyung Chang  Hwasung Industrial

Good diversification

The 3 months correlation between Kyung and Hwasung is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Kyung Chang Industrial and Hwasung Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwasung Industrial and Kyung Chang 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 Kyung Chang Industrial are associated (or correlated) with Hwasung Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwasung Industrial has no effect on the direction of Kyung Chang i.e., Kyung Chang and Hwasung Industrial go up and down completely randomly.

Pair Corralation between Kyung Chang and Hwasung Industrial

Assuming the 90 days trading horizon Kyung Chang Industrial is expected to generate 2.1 times more return on investment than Hwasung Industrial. However, Kyung Chang is 2.1 times more volatile than Hwasung Industrial Co. It trades about 0.15 of its potential returns per unit of risk. Hwasung Industrial Co is currently generating about 0.24 per unit of risk. If you would invest  192,900  in Kyung Chang Industrial on October 23, 2024 and sell it today you would earn a total of  12,100  from holding Kyung Chang Industrial or generate 6.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Kyung Chang Industrial  vs.  Hwasung Industrial Co

Kyung Chang Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kyung Chang Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hwasung Industrial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hwasung Industrial Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hwasung Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kyung Chang and Hwasung Industrial

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

The idea behind Kyung Chang Industrial and Hwasung Industrial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.