Correlation Between Gyeongnam Steel and Hansol Homedeco

Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel and Hansol Homedeco 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 Gyeongnam Steel and Hansol Homedeco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gyeongnam Steel Co and Hansol Homedeco Co, you can compare the effects of market volatilities on Gyeongnam Steel and Hansol Homedeco 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 Gyeongnam Steel with a short position of Hansol Homedeco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and Hansol Homedeco.

Diversification Opportunities for Gyeongnam Steel and Hansol Homedeco

0.0

Correlation Coefficient

Gyeongnam Steel  Hansol Homedeco

Pay attention - limited upside

The 3 months correlation between Gyeongnam and Hansol is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Hansol Homedeco Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hansol Homedeco and Gyeongnam 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 Gyeongnam Steel Co are associated (or correlated) with Hansol Homedeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hansol Homedeco has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and Hansol Homedeco go up and down completely randomly.

Pair Corralation between Gyeongnam Steel and Hansol Homedeco

Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 0.99 times more return on investment than Hansol Homedeco. However, Gyeongnam Steel Co is 1.01 times less risky than Hansol Homedeco. It trades about 0.03 of its potential returns per unit of risk. Hansol Homedeco Co is currently generating about -0.11 per unit of risk. If you would invest  284,500  in Gyeongnam Steel Co on August 31, 2024 and sell it today you would earn a total of  5,000  from holding Gyeongnam Steel Co or generate 1.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Gyeongnam Steel Co  vs.  Hansol Homedeco Co

Gyeongnam Steel

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gyeongnam Steel Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Gyeongnam Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hansol Homedeco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hansol Homedeco Co 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.

Pair Trading with Gyeongnam Steel and Hansol Homedeco

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

The idea behind Gyeongnam Steel Co and Hansol Homedeco Co 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 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.