Correlation Between Hankook Steel and Nature

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

Diversification Opportunities for Hankook Steel and Nature

0.28

Correlation Coefficient

Hankook Steel  Nature

Modest diversification

The 3 months correlation between Hankook and Nature is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Hankook Steel Co and Nature and Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature and Environment 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 Nature. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature and Environment has no effect on the direction of Hankook Steel i.e., Hankook Steel and Nature go up and down completely randomly.

Pair Corralation between Hankook Steel and Nature

Assuming the 90 days trading horizon Hankook Steel Co is expected to generate 2.08 times more return on investment than Nature. However, Hankook Steel is 2.08 times more volatile than Nature and Environment. It trades about 0.07 of its potential returns per unit of risk. Nature and Environment is currently generating about 0.04 per unit of risk. If you would invest  186,400  in Hankook Steel Co on September 21, 2024 and sell it today you would earn a total of  12,500  from holding Hankook Steel Co or generate 6.71% return on investment over 90 days.

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

Hankook Steel Co  vs.  Nature and Environment

Hankook Steel

Risk-Adjusted Performance

1 of 100

Insignificant

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 weak basic indicators, Hankook Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nature and Environment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nature and Environment 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 Nature

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

The idea behind Hankook Steel Co and Nature and Environment 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.