Correlation Between Han Kook and Stic Investments

Can any of the company-specific risk be diversified away by investing in both Han Kook and Stic Investments 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 Han Kook and Stic Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Han Kook Steel and Stic Investments, you can compare the effects of market volatilities on Han Kook and Stic Investments 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 Han Kook with a short position of Stic Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Han Kook and Stic Investments.

Diversification Opportunities for Han Kook and Stic Investments

0.39

Correlation Coefficient

Han Kook  Stic Investments

Weak diversification

The 3 months correlation between Han and Stic is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Han Kook Steel and Stic Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stic Investments and Han Kook 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 Han Kook Steel are associated (or correlated) with Stic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stic Investments has no effect on the direction of Han Kook i.e., Han Kook and Stic Investments go up and down completely randomly.

Pair Corralation between Han Kook and Stic Investments

Assuming the 90 days trading horizon Han Kook Steel is expected to under-perform the Stic Investments. But the stock apears to be less risky and, when comparing its historical volatility, Han Kook Steel is 2.06 times less risky than Stic Investments. The stock trades about -0.12 of its potential returns per unit of risk. The Stic Investments is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  863,000  in Stic Investments on December 30, 2024 and sell it today you would earn a total of  50,000  from holding Stic Investments or generate 5.79% return on investment over 90 days.

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

Han Kook Steel  vs.  Stic Investments

Han Kook Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Han Kook Steel 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.

Stic Investments

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stic Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Stic Investments may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Han Kook and Stic Investments

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

The idea behind Han Kook Steel and Stic Investments 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.