Correlation Between Hankuk Steel and ATON

Can any of the company-specific risk be diversified away by investing in both Hankuk Steel and ATON 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 ATON 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 ATON Inc, you can compare the effects of market volatilities on Hankuk Steel and ATON 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 ATON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankuk Steel and ATON.

Diversification Opportunities for Hankuk Steel and ATON

0.66

Correlation Coefficient

Hankuk Steel  ATON

Poor diversification

The 3 months correlation between Hankuk and ATON is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hankuk Steel Wire and ATON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATON Inc 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 ATON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATON Inc has no effect on the direction of Hankuk Steel i.e., Hankuk Steel and ATON go up and down completely randomly.

Pair Corralation between Hankuk Steel and ATON

Assuming the 90 days trading horizon Hankuk Steel is expected to generate 1.12 times less return on investment than ATON. But when comparing it to its historical volatility, Hankuk Steel Wire is 1.56 times less risky than ATON. It trades about 0.2 of its potential returns per unit of risk. ATON Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  405,791  in ATON Inc on October 24, 2024 and sell it today you would earn a total of  256,209  from holding ATON Inc or generate 63.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Hankuk Steel Wire  vs.  ATON Inc

Hankuk Steel Wire

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hankuk Steel Wire are ranked lower than 15 (%) 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.

ATON Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATON Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ATON sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hankuk Steel and ATON

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

The idea behind Hankuk Steel Wire and ATON Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.