Correlation Between Hankook Steel and J Steel

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

Diversification Opportunities for Hankook Steel and J Steel

-0.11

Correlation Coefficient

Hankook Steel  J Steel

Good diversification

The 3 months correlation between Hankook and 023440 is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Steel Co and J Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Steel 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 J Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Steel has no effect on the direction of Hankook Steel i.e., Hankook Steel and J Steel go up and down completely randomly.

Pair Corralation between Hankook Steel and J Steel

Assuming the 90 days trading horizon Hankook Steel is expected to generate 2.07 times less return on investment than J Steel. In addition to that, Hankook Steel is 1.05 times more volatile than J Steel Co. It trades about 0.03 of its total potential returns per unit of risk. J Steel Co is currently generating about 0.06 per unit of volatility. If you would invest  161,000  in J Steel Co on September 23, 2024 and sell it today you would earn a total of  13,400  from holding J Steel Co or generate 8.32% return on investment over 90 days.

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

Hankook Steel Co  vs.  J Steel Co

Hankook Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hankook Steel Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hankook Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

J Steel

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in J Steel Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, J Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hankook Steel and J Steel

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

The idea behind Hankook Steel Co and J Steel Co 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.