Correlation Between Hwangkum Steel and Echomarketing CoLtd

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

Diversification Opportunities for Hwangkum Steel and Echomarketing CoLtd

0.64

Correlation Coefficient

Hwangkum Steel  Echomarketing CoLtd

Poor diversification

The 3 months correlation between Hwangkum and Echomarketing is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hwangkum Steel Technology and Echomarketing CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Echomarketing CoLtd 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 Echomarketing CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Echomarketing CoLtd has no effect on the direction of Hwangkum Steel i.e., Hwangkum Steel and Echomarketing CoLtd go up and down completely randomly.

Pair Corralation between Hwangkum Steel and Echomarketing CoLtd

Assuming the 90 days trading horizon Hwangkum Steel Technology is expected to under-perform the Echomarketing CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, Hwangkum Steel Technology is 2.4 times less risky than Echomarketing CoLtd. The stock trades about -0.13 of its potential returns per unit of risk. The Echomarketing CoLtd is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,039,000  in Echomarketing CoLtd on September 12, 2024 and sell it today you would lose (56,000) from holding Echomarketing CoLtd or give up 5.39% of portfolio value over 90 days.

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

Hwangkum Steel Technology  vs.  Echomarketing CoLtd

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.

Echomarketing CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Echomarketing CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Echomarketing CoLtd 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 Echomarketing CoLtd

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

The idea behind Hwangkum Steel Technology and Echomarketing CoLtd 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.