Correlation Between Hwangkum Steel and Moonbae Steel

Can any of the company-specific risk be diversified away by investing in both Hwangkum Steel and Moonbae 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 Hwangkum Steel and Moonbae Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hwangkum Steel Technology and Moonbae Steel, you can compare the effects of market volatilities on Hwangkum Steel and Moonbae 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 Hwangkum Steel with a short position of Moonbae Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwangkum Steel and Moonbae Steel.

Diversification Opportunities for Hwangkum Steel and Moonbae Steel

0.4

Correlation Coefficient

Hwangkum Steel  Moonbae Steel

Very weak diversification

The 3 months correlation between Hwangkum and Moonbae is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hwangkum Steel Technology and Moonbae Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moonbae Steel and Hwangkum 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 Hwangkum Steel Technology are associated (or correlated) with Moonbae Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moonbae Steel has no effect on the direction of Hwangkum Steel i.e., Hwangkum Steel and Moonbae Steel go up and down completely randomly.

Pair Corralation between Hwangkum Steel and Moonbae Steel

Assuming the 90 days trading horizon Hwangkum Steel Technology is expected to under-perform the Moonbae Steel. But the stock apears to be less risky and, when comparing its historical volatility, Hwangkum Steel Technology is 2.09 times less risky than Moonbae Steel. The stock trades about -0.13 of its potential returns per unit of risk. The Moonbae Steel is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  242,000  in Moonbae Steel on September 30, 2024 and sell it today you would lose (16,000) from holding Moonbae Steel or give up 6.61% of portfolio value over 90 days.

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

Hwangkum Steel Technology  vs.  Moonbae Steel

Hwangkum Steel Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hwangkum Steel Technology 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.

Moonbae Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moonbae Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Moonbae Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hwangkum Steel and Moonbae Steel

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

The idea behind Hwangkum Steel Technology and Moonbae Steel 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.