Correlation Between Hansol Homedeco and Korea Shipbuilding

Can any of the company-specific risk be diversified away by investing in both Hansol Homedeco and Korea Shipbuilding 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 Hansol Homedeco and Korea Shipbuilding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hansol Homedeco Co and Korea Shipbuilding Offshore, you can compare the effects of market volatilities on Hansol Homedeco and Korea Shipbuilding 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 Hansol Homedeco with a short position of Korea Shipbuilding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hansol Homedeco and Korea Shipbuilding.

Diversification Opportunities for Hansol Homedeco and Korea Shipbuilding

0.41

Correlation Coefficient

Hansol Homedeco  Korea Shipbuilding

Very weak diversification

The 3 months correlation between Hansol and Korea is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hansol Homedeco Co and Korea Shipbuilding Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Shipbuilding and Hansol Homedeco 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 Hansol Homedeco Co are associated (or correlated) with Korea Shipbuilding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Shipbuilding has no effect on the direction of Hansol Homedeco i.e., Hansol Homedeco and Korea Shipbuilding go up and down completely randomly.

Pair Corralation between Hansol Homedeco and Korea Shipbuilding

Assuming the 90 days trading horizon Hansol Homedeco Co is expected to generate 1.72 times more return on investment than Korea Shipbuilding. However, Hansol Homedeco is 1.72 times more volatile than Korea Shipbuilding Offshore. It trades about 0.1 of its potential returns per unit of risk. Korea Shipbuilding Offshore is currently generating about -0.01 per unit of risk. If you would invest  65,100  in Hansol Homedeco Co on December 23, 2024 and sell it today you would earn a total of  18,700  from holding Hansol Homedeco Co or generate 28.73% return on investment over 90 days.

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

Hansol Homedeco Co  vs.  Korea Shipbuilding Offshore

Hansol Homedeco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hansol Homedeco Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hansol Homedeco sustained solid returns over the last few months and may actually be approaching a breakup point.

Korea Shipbuilding

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hansol Homedeco and Korea Shipbuilding

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

The idea behind Hansol Homedeco Co and Korea Shipbuilding Offshore 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.