Correlation Between Clean Science and Hankook Furniture

Can any of the company-specific risk be diversified away by investing in both Clean Science and Hankook Furniture 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 Clean Science and Hankook Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Clean Science co and Hankook Furniture Co, you can compare the effects of market volatilities on Clean Science and Hankook Furniture 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 Clean Science with a short position of Hankook Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Science and Hankook Furniture.

Diversification Opportunities for Clean Science and Hankook Furniture

-0.81

Correlation Coefficient

Clean Science  Hankook Furniture

Pay attention - limited upside

The 3 months correlation between Clean and Hankook is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Clean Science co and Hankook Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Furniture and Clean Science 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 Clean Science co are associated (or correlated) with Hankook Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Furniture has no effect on the direction of Clean Science i.e., Clean Science and Hankook Furniture go up and down completely randomly.

Pair Corralation between Clean Science and Hankook Furniture

Assuming the 90 days trading horizon Clean Science co is expected to under-perform the Hankook Furniture. In addition to that, Clean Science is 1.73 times more volatile than Hankook Furniture Co. It trades about -0.14 of its total potential returns per unit of risk. Hankook Furniture Co is currently generating about 0.06 per unit of volatility. If you would invest  406,500  in Hankook Furniture Co on September 17, 2024 and sell it today you would earn a total of  6,500  from holding Hankook Furniture Co or generate 1.6% return on investment over 90 days.

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

Clean Science co  vs.  Hankook Furniture Co

Clean Science co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Science co 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.

Hankook Furniture

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hankook Furniture Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hankook Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clean Science and Hankook Furniture

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

The idea behind Clean Science co and Hankook Furniture 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.