Correlation Between Hanmi Semiconductor and Seoul Electronics

Can any of the company-specific risk be diversified away by investing in both Hanmi Semiconductor and Seoul Electronics 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 Hanmi Semiconductor and Seoul Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hanmi Semiconductor Co and Seoul Electronics Telecom, you can compare the effects of market volatilities on Hanmi Semiconductor and Seoul Electronics 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 Hanmi Semiconductor with a short position of Seoul Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanmi Semiconductor and Seoul Electronics.

Diversification Opportunities for Hanmi Semiconductor and Seoul Electronics

0.57

Correlation Coefficient

Hanmi Semiconductor  Seoul Electronics

Very weak diversification

The 3 months correlation between Hanmi and Seoul is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hanmi Semiconductor Co and Seoul Electronics Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Electronics Telecom and Hanmi Semiconductor 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 Hanmi Semiconductor Co are associated (or correlated) with Seoul Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Electronics Telecom has no effect on the direction of Hanmi Semiconductor i.e., Hanmi Semiconductor and Seoul Electronics go up and down completely randomly.

Pair Corralation between Hanmi Semiconductor and Seoul Electronics

Assuming the 90 days trading horizon Hanmi Semiconductor Co is expected to under-perform the Seoul Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Hanmi Semiconductor Co is 1.26 times less risky than Seoul Electronics. The stock trades about -0.01 of its potential returns per unit of risk. The Seoul Electronics Telecom is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  22,800  in Seoul Electronics Telecom on December 30, 2024 and sell it today you would lose (1,300) from holding Seoul Electronics Telecom or give up 5.7% of portfolio value over 90 days.

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

Hanmi Semiconductor Co  vs.  Seoul Electronics Telecom

Hanmi Semiconductor

Risk-Adjusted Performance

Very Weak

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

Seoul Electronics Telecom

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hanmi Semiconductor and Seoul Electronics

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

The idea behind Hanmi Semiconductor Co and Seoul Electronics Telecom 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.