Correlation Between SK Holdings and Hanwha Life

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

By analyzing existing cross correlation between SK Holdings Co and Hanwha Life Insurance, you can compare the effects of market volatilities on SK Holdings and Hanwha Life 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 SK Holdings with a short position of Hanwha Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Holdings and Hanwha Life.

Diversification Opportunities for SK Holdings and Hanwha Life

0.23

Correlation Coefficient

SK Holdings  Hanwha Life

Modest diversification

The 3 months correlation between 034730 and Hanwha is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding SK Holdings Co and Hanwha Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Life Insurance and SK Holdings 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 SK Holdings Co are associated (or correlated) with Hanwha Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Life Insurance has no effect on the direction of SK Holdings i.e., SK Holdings and Hanwha Life go up and down completely randomly.

Pair Corralation between SK Holdings and Hanwha Life

Assuming the 90 days trading horizon SK Holdings is expected to generate 2.25 times less return on investment than Hanwha Life. But when comparing it to its historical volatility, SK Holdings Co is 1.15 times less risky than Hanwha Life. It trades about 0.02 of its potential returns per unit of risk. Hanwha Life Insurance is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  253,000  in Hanwha Life Insurance on December 25, 2024 and sell it today you would earn a total of  10,500  from holding Hanwha Life Insurance or generate 4.15% return on investment over 90 days.

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

SK Holdings Co  vs.  Hanwha Life Insurance

SK Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SK Holdings Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SK Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanwha Life Insurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hanwha Life Insurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hanwha Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SK Holdings and Hanwha Life

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

The idea behind SK Holdings Co and Hanwha Life Insurance 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.