Correlation Between Han Kook and Cheryong Electric

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

Diversification Opportunities for Han Kook and Cheryong Electric

-0.01

Correlation Coefficient

Han Kook  Cheryong Electric

Good diversification

The 3 months correlation between Han and Cheryong is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Han Kook Steel and Cheryong Electric CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheryong Electric CoLtd 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 Cheryong Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheryong Electric CoLtd has no effect on the direction of Han Kook i.e., Han Kook and Cheryong Electric go up and down completely randomly.

Pair Corralation between Han Kook and Cheryong Electric

Assuming the 90 days trading horizon Han Kook is expected to generate 9.47 times less return on investment than Cheryong Electric. In addition to that, Han Kook is 1.03 times more volatile than Cheryong Electric CoLtd. It trades about 0.01 of its total potential returns per unit of risk. Cheryong Electric CoLtd is currently generating about 0.05 per unit of volatility. If you would invest  5,354,477  in Cheryong Electric CoLtd on October 25, 2024 and sell it today you would earn a total of  495,523  from holding Cheryong Electric CoLtd or generate 9.25% return on investment over 90 days.

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

Han Kook Steel  vs.  Cheryong Electric CoLtd

Han Kook Steel

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Han Kook is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cheryong Electric CoLtd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cheryong Electric CoLtd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cheryong Electric sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Han Kook and Cheryong Electric

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

The idea behind Han Kook Steel and Cheryong Electric CoLtd 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 Global Correlations module to find global opportunities by holding instruments from different markets.