Correlation Between Hankook Steel and Stic Investments

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

Diversification Opportunities for Hankook Steel and Stic Investments

0.15

Correlation Coefficient

Hankook Steel  Stic Investments

Average diversification

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

Pair Corralation between Hankook Steel and Stic Investments

Assuming the 90 days trading horizon Hankook Steel Co is expected to under-perform the Stic Investments. In addition to that, Hankook Steel is 1.38 times more volatile than Stic Investments. It trades about -0.03 of its total potential returns per unit of risk. Stic Investments is currently generating about 0.04 per unit of volatility. If you would invest  593,345  in Stic Investments on October 17, 2024 and sell it today you would earn a total of  255,655  from holding Stic Investments or generate 43.09% return on investment over 90 days.

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

Hankook Steel Co  vs.  Stic Investments

Hankook Steel

Risk-Adjusted Performance

0 of 100

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 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.

Stic Investments

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stic Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Stic Investments 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 Stic Investments

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

The idea behind Hankook Steel Co and Stic Investments 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..