Correlation Between Hansol Homedeco and Hanwha Solutions

Can any of the company-specific risk be diversified away by investing in both Hansol Homedeco 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 Hansol Homedeco and Hanwha Solutions 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 Hanwha Solutions, you can compare the effects of market volatilities on Hansol Homedeco 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 Hansol Homedeco with a short position of Hanwha Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hansol Homedeco and Hanwha Solutions.

Diversification Opportunities for Hansol Homedeco and Hanwha Solutions

0.88

Correlation Coefficient

Hansol Homedeco  Hanwha Solutions

Very poor diversification

The 3 months correlation between Hansol and Hanwha is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hansol Homedeco Co and Hanwha Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Solutions 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 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 Hansol Homedeco i.e., Hansol Homedeco and Hanwha Solutions go up and down completely randomly.

Pair Corralation between Hansol Homedeco and Hanwha Solutions

Assuming the 90 days trading horizon Hansol Homedeco Co is expected to generate 0.92 times more return on investment than Hanwha Solutions. However, Hansol Homedeco Co is 1.08 times less risky than Hanwha Solutions. It trades about 0.35 of its potential returns per unit of risk. Hanwha Solutions is currently generating about 0.14 per unit of risk. If you would invest  59,000  in Hansol Homedeco Co on October 11, 2024 and sell it today you would earn a total of  12,000  from holding Hansol Homedeco Co or generate 20.34% return on investment over 90 days.

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

Hansol Homedeco Co  vs.  Hanwha Solutions

Hansol Homedeco

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Hansol Homedeco and Hanwha Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hansol Homedeco 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 Hansol Homedeco 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.