Correlation Between Hankook Steel and Jin Air

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

Diversification Opportunities for Hankook Steel and Jin Air

0.28

Correlation Coefficient

Hankook Steel  Jin Air

Modest diversification

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

Pair Corralation between Hankook Steel and Jin Air

Assuming the 90 days trading horizon Hankook Steel Co is expected to generate 1.48 times more return on investment than Jin Air. However, Hankook Steel is 1.48 times more volatile than Jin Air Co. It trades about 0.05 of its potential returns per unit of risk. Jin Air Co is currently generating about 0.07 per unit of risk. If you would invest  197,100  in Hankook Steel Co on September 2, 2024 and sell it today you would earn a total of  18,400  from holding Hankook Steel Co or generate 9.34% 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.  Jin Air Co

Hankook Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hankook Steel Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hankook Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Jin Air

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jin Air Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jin Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hankook Steel and Jin Air

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

The idea behind Hankook Steel Co and Jin Air 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.