Correlation Between Hankook Steel and Kumho Ind

Can any of the company-specific risk be diversified away by investing in both Hankook Steel and Kumho Ind 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 Hankook Steel and Kumho Ind into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Hankook Steel and Kumho Ind

0.48

Correlation Coefficient

Hankook Steel  Kumho Ind

Very weak diversification

The 3 months correlation between Hankook and Kumho is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Steel Co and Kumho Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Ind and Hankook Steel 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 Hankook Steel Co are associated (or correlated) with Kumho Ind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Ind has no effect on the direction of Hankook Steel i.e., Hankook Steel and Kumho Ind go up and down completely randomly.

Pair Corralation between Hankook Steel and Kumho Ind

Assuming the 90 days trading horizon Hankook Steel Co is expected to under-perform the Kumho Ind. But the stock apears to be less risky and, when comparing its historical volatility, Hankook Steel Co is 1.93 times less risky than Kumho Ind. The stock trades about -0.16 of its potential returns per unit of risk. The Kumho Ind is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  271,500  in Kumho Ind on December 25, 2024 and sell it today you would lose (8,000) from holding Kumho Ind or give up 2.95% of portfolio value over 90 days.

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

Hankook Steel Co  vs.  Kumho Ind

Hankook Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hankook Steel Co 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kumho Ind

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hankook Steel and Kumho Ind

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

The idea behind Hankook Steel Co and Kumho Ind 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.