Correlation Between Gyeongnam Steel and Histeel

Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel and Histeel 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 Histeel 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 Histeel, you can compare the effects of market volatilities on Gyeongnam Steel and Histeel 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 Histeel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and Histeel.

Diversification Opportunities for Gyeongnam Steel and Histeel

-0.62

Correlation Coefficient

Gyeongnam Steel  Histeel

Excellent diversification

The 3 months correlation between Gyeongnam and Histeel is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Histeel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Histeel 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 Histeel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Histeel has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and Histeel go up and down completely randomly.

Pair Corralation between Gyeongnam Steel and Histeel

Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 2.09 times more return on investment than Histeel. However, Gyeongnam Steel is 2.09 times more volatile than Histeel. It trades about 0.3 of its potential returns per unit of risk. Histeel is currently generating about -0.06 per unit of risk. If you would invest  303,000  in Gyeongnam Steel Co on September 26, 2024 and sell it today you would earn a total of  211,000  from holding Gyeongnam Steel Co or generate 69.64% return on investment over 90 days.

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

Gyeongnam Steel Co  vs.  Histeel

Gyeongnam Steel

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gyeongnam Steel Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gyeongnam Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Histeel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Histeel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gyeongnam Steel and Histeel

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

The idea behind Gyeongnam Steel Co and Histeel 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.