Correlation Between Hankuk Steel and Hanmi Semiconductor

Can any of the company-specific risk be diversified away by investing in both Hankuk Steel and Hanmi Semiconductor 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 Hankuk Steel and Hanmi Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hankuk Steel Wire and Hanmi Semiconductor Co, you can compare the effects of market volatilities on Hankuk Steel and Hanmi Semiconductor 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 Hankuk Steel with a short position of Hanmi Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankuk Steel and Hanmi Semiconductor.

Diversification Opportunities for Hankuk Steel and Hanmi Semiconductor

-0.36

Correlation Coefficient

Hankuk Steel  Hanmi Semiconductor

Very good diversification

The 3 months correlation between Hankuk and Hanmi is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hankuk Steel Wire and Hanmi Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanmi Semiconductor and Hankuk Steel 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 Hankuk Steel Wire are associated (or correlated) with Hanmi Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanmi Semiconductor has no effect on the direction of Hankuk Steel i.e., Hankuk Steel and Hanmi Semiconductor go up and down completely randomly.

Pair Corralation between Hankuk Steel and Hanmi Semiconductor

Assuming the 90 days trading horizon Hankuk Steel Wire is expected to generate 1.62 times more return on investment than Hanmi Semiconductor. However, Hankuk Steel is 1.62 times more volatile than Hanmi Semiconductor Co. It trades about 0.22 of its potential returns per unit of risk. Hanmi Semiconductor Co is currently generating about 0.1 per unit of risk. If you would invest  299,500  in Hankuk Steel Wire on September 28, 2024 and sell it today you would earn a total of  98,500  from holding Hankuk Steel Wire or generate 32.89% return on investment over 90 days.

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

Hankuk Steel Wire  vs.  Hanmi Semiconductor Co

Hankuk Steel Wire

Risk-Adjusted Performance

10 of 100

OK

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

Hanmi Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanmi Semiconductor 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hankuk Steel and Hanmi Semiconductor

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

The idea behind Hankuk Steel Wire and Hanmi Semiconductor 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.