Correlation Between Korea Real and Hana Financial

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

By analyzing existing cross correlation between Korea Real Estate and Hana Financial 7, you can compare the effects of market volatilities on Korea Real and Hana Financial 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 Korea Real with a short position of Hana Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Real and Hana Financial.

Diversification Opportunities for Korea Real and Hana Financial

0.47

Correlation Coefficient

Korea Real  Hana Financial

Very weak diversification

The 3 months correlation between Korea and Hana is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate and Hana Financial 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hana Financial 7 and Korea Real 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 Korea Real Estate are associated (or correlated) with Hana Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hana Financial 7 has no effect on the direction of Korea Real i.e., Korea Real and Hana Financial go up and down completely randomly.

Pair Corralation between Korea Real and Hana Financial

Assuming the 90 days trading horizon Korea Real Estate is expected to under-perform the Hana Financial. But the stock apears to be less risky and, when comparing its historical volatility, Korea Real Estate is 9.9 times less risky than Hana Financial. The stock trades about -0.02 of its potential returns per unit of risk. The Hana Financial 7 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,774,000  in Hana Financial 7 on December 30, 2024 and sell it today you would earn a total of  256,000  from holding Hana Financial 7 or generate 14.43% return on investment over 90 days.

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

Korea Real Estate  vs.  Hana Financial 7

Korea Real Estate

Risk-Adjusted Performance

Very Weak

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

Hana Financial 7

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hana Financial 7 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hana Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Korea Real and Hana Financial

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

The idea behind Korea Real Estate and Hana Financial 7 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.