Correlation Between Jeong Moon and Hanil Iron

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

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

Diversification Opportunities for Jeong Moon and Hanil Iron

0.34

Correlation Coefficient

Jeong Moon  Hanil Iron

Weak diversification

The 3 months correlation between Jeong and Hanil is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Jeong Moon Information and Hanil Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanil Iron Steel and Jeong Moon 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 Jeong Moon Information are associated (or correlated) with Hanil Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanil Iron Steel has no effect on the direction of Jeong Moon i.e., Jeong Moon and Hanil Iron go up and down completely randomly.

Pair Corralation between Jeong Moon and Hanil Iron

Assuming the 90 days trading horizon Jeong Moon Information is expected to under-perform the Hanil Iron. In addition to that, Jeong Moon is 1.51 times more volatile than Hanil Iron Steel. It trades about -0.12 of its total potential returns per unit of risk. Hanil Iron Steel is currently generating about 0.05 per unit of volatility. If you would invest  193,600  in Hanil Iron Steel on September 20, 2024 and sell it today you would earn a total of  3,800  from holding Hanil Iron Steel or generate 1.96% return on investment over 90 days.

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

Jeong Moon Information  vs.  Hanil Iron Steel

Jeong Moon Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jeong Moon Information 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.

Hanil Iron Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jeong Moon and Hanil Iron

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

The idea behind Jeong Moon Information and Hanil Iron 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.

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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.