Correlation Between Hankook Steel and Iljin Display

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

Diversification Opportunities for Hankook Steel and Iljin Display

0.09

Correlation Coefficient

Hankook Steel  Iljin Display

Significant diversification

The 3 months correlation between Hankook and Iljin is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Steel Co and Iljin Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iljin Display 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 Iljin Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iljin Display has no effect on the direction of Hankook Steel i.e., Hankook Steel and Iljin Display go up and down completely randomly.

Pair Corralation between Hankook Steel and Iljin Display

Assuming the 90 days trading horizon Hankook Steel Co is expected to under-perform the Iljin Display. But the stock apears to be less risky and, when comparing its historical volatility, Hankook Steel Co is 1.35 times less risky than Iljin Display. The stock trades about -0.18 of its potential returns per unit of risk. The Iljin Display is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  83,600  in Iljin Display on December 23, 2024 and sell it today you would lose (1,900) from holding Iljin Display or give up 2.27% of portfolio value over 90 days.

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

Hankook Steel Co  vs.  Iljin Display

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.

Iljin Display

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iljin Display has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iljin Display 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 Iljin Display

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

The idea behind Hankook Steel Co and Iljin Display 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.