Correlation Between Han Kook and RPBio

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

Diversification Opportunities for Han Kook and RPBio

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between Han and RPBio is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Han Kook Steel and RPBio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPBio Inc 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 RPBio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPBio Inc has no effect on the direction of Han Kook i.e., Han Kook and RPBio go up and down completely randomly.

Pair Corralation between Han Kook and RPBio

Assuming the 90 days trading horizon Han Kook Steel is expected to generate 1.7 times more return on investment than RPBio. However, Han Kook is 1.7 times more volatile than RPBio Inc. It trades about 0.03 of its potential returns per unit of risk. RPBio Inc is currently generating about -0.11 per unit of risk. If you would invest  197,100  in Han Kook Steel on September 5, 2024 and sell it today you would earn a total of  7,400  from holding Han Kook Steel or generate 3.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy98.31%
ValuesDaily Returns

Han Kook Steel  vs.  RPBio Inc

 Performance 
       Timeline  
Han Kook Steel 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Han Kook Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Han Kook may actually be approaching a critical reversion point that can send shares even higher in January 2025.
RPBio Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days RPBio Inc 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Han Kook and RPBio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Han Kook and RPBio

The main advantage of trading using opposite Han Kook and RPBio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Han Kook position performs unexpectedly, RPBio 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 RPBio will offset losses from the drop in RPBio's long position.
The idea behind Han Kook Steel and RPBio 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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