Correlation Between Korea Aerospace and Hanwha InvestmentSecuri

Can any of the company-specific risk be diversified away by investing in both Korea Aerospace and Hanwha InvestmentSecuri 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 Korea Aerospace and Hanwha InvestmentSecuri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Korea Aerospace Industries and Hanwha InvestmentSecurities Co, you can compare the effects of market volatilities on Korea Aerospace and Hanwha InvestmentSecuri 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 Korea Aerospace with a short position of Hanwha InvestmentSecuri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Aerospace and Hanwha InvestmentSecuri.

Diversification Opportunities for Korea Aerospace and Hanwha InvestmentSecuri

0.86

Correlation Coefficient

Korea Aerospace  Hanwha InvestmentSecuri

Very poor diversification

The 3 months correlation between Korea and Hanwha is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Korea Aerospace Industries and Hanwha InvestmentSecurities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha InvestmentSecuri and Korea Aerospace 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 Korea Aerospace Industries are associated (or correlated) with Hanwha InvestmentSecuri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha InvestmentSecuri has no effect on the direction of Korea Aerospace i.e., Korea Aerospace and Hanwha InvestmentSecuri go up and down completely randomly.

Pair Corralation between Korea Aerospace and Hanwha InvestmentSecuri

Assuming the 90 days trading horizon Korea Aerospace Industries is expected to generate 0.7 times more return on investment than Hanwha InvestmentSecuri. However, Korea Aerospace Industries is 1.44 times less risky than Hanwha InvestmentSecuri. It trades about 0.09 of its potential returns per unit of risk. Hanwha InvestmentSecurities Co is currently generating about 0.05 per unit of risk. If you would invest  5,290,000  in Korea Aerospace Industries on September 4, 2024 and sell it today you would earn a total of  670,000  from holding Korea Aerospace Industries or generate 12.67% return on investment over 90 days.

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

Korea Aerospace Industries  vs.  Hanwha InvestmentSecurities Co

Korea Aerospace Indu

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Aerospace Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Aerospace sustained solid returns over the last few months and may actually be approaching a breakup point.

Hanwha InvestmentSecuri

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hanwha InvestmentSecurities Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hanwha InvestmentSecuri may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Korea Aerospace and Hanwha InvestmentSecuri

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

The idea behind Korea Aerospace Industries and Hanwha InvestmentSecurities 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.