Correlation Between Seoulin Bioscience and Hanjoo Light

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

By analyzing existing cross correlation between Seoulin Bioscience CoLtd and Hanjoo Light Metal, you can compare the effects of market volatilities on Seoulin Bioscience and Hanjoo Light 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 Seoulin Bioscience with a short position of Hanjoo Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoulin Bioscience and Hanjoo Light.

Diversification Opportunities for Seoulin Bioscience and Hanjoo Light

0.21

Correlation Coefficient

Seoulin Bioscience  Hanjoo Light

Modest diversification

The 3 months correlation between Seoulin and Hanjoo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Seoulin Bioscience CoLtd and Hanjoo Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjoo Light Metal and Seoulin Bioscience 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 Seoulin Bioscience CoLtd are associated (or correlated) with Hanjoo Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjoo Light Metal has no effect on the direction of Seoulin Bioscience i.e., Seoulin Bioscience and Hanjoo Light go up and down completely randomly.

Pair Corralation between Seoulin Bioscience and Hanjoo Light

Assuming the 90 days trading horizon Seoulin Bioscience CoLtd is expected to under-perform the Hanjoo Light. But the stock apears to be less risky and, when comparing its historical volatility, Seoulin Bioscience CoLtd is 1.17 times less risky than Hanjoo Light. The stock trades about -0.06 of its potential returns per unit of risk. The Hanjoo Light Metal is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  74,900  in Hanjoo Light Metal on December 24, 2024 and sell it today you would lose (3,200) from holding Hanjoo Light Metal or give up 4.27% of portfolio value over 90 days.

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

Seoulin Bioscience CoLtd  vs.  Hanjoo Light Metal

Seoulin Bioscience CoLtd

Risk-Adjusted Performance

Very Weak

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

Hanjoo Light Metal

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Seoulin Bioscience and Hanjoo Light

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

The idea behind Seoulin Bioscience CoLtd and Hanjoo Light Metal 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.