Correlation Between Hankook Steel and Shinsegae Food

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

Diversification Opportunities for Hankook Steel and Shinsegae Food

0.24

Correlation Coefficient

Hankook Steel  Shinsegae Food

Modest diversification

The 3 months correlation between Hankook and Shinsegae is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Steel Co and Shinsegae Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Food 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 Shinsegae Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Food has no effect on the direction of Hankook Steel i.e., Hankook Steel and Shinsegae Food go up and down completely randomly.

Pair Corralation between Hankook Steel and Shinsegae Food

Assuming the 90 days trading horizon Hankook Steel Co is expected to generate 3.72 times more return on investment than Shinsegae Food. However, Hankook Steel is 3.72 times more volatile than Shinsegae Food. It trades about 0.1 of its potential returns per unit of risk. Shinsegae Food is currently generating about -0.03 per unit of risk. If you would invest  181,700  in Hankook Steel Co on September 17, 2024 and sell it today you would earn a total of  19,800  from holding Hankook Steel Co or generate 10.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Hankook Steel Co  vs.  Shinsegae Food

Hankook Steel

Risk-Adjusted Performance

2 of 100

Weak

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

Shinsegae Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinsegae Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hankook Steel and Shinsegae Food

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

The idea behind Hankook Steel Co and Shinsegae Food 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.