Correlation Between INSUN Environmental and Hanjoo Light

Can any of the company-specific risk be diversified away by investing in both INSUN Environmental and Hanjoo Light 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 INSUN Environmental and Hanjoo Light into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INSUN Environmental New and Hanjoo Light Metal, you can compare the effects of market volatilities on INSUN Environmental and Hanjoo Light 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 INSUN Environmental with a short position of Hanjoo Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of INSUN Environmental and Hanjoo Light.

Diversification Opportunities for INSUN Environmental and Hanjoo Light

0.86

Correlation Coefficient

INSUN Environmental  Hanjoo Light

Very poor diversification

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

Pair Corralation between INSUN Environmental and Hanjoo Light

Assuming the 90 days trading horizon INSUN Environmental New is expected to generate 1.63 times more return on investment than Hanjoo Light. However, INSUN Environmental is 1.63 times more volatile than Hanjoo Light Metal. It trades about 0.11 of its potential returns per unit of risk. Hanjoo Light Metal is currently generating about -0.19 per unit of risk. If you would invest  496,500  in INSUN Environmental New on September 23, 2024 and sell it today you would earn a total of  39,500  from holding INSUN Environmental New or generate 7.96% return on investment over 90 days.

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

INSUN Environmental New  vs.  Hanjoo Light Metal

INSUN Environmental New

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hanjoo Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanjoo Light Metal 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 INSUN Environmental and Hanjoo Light

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

The idea behind INSUN Environmental New and Hanjoo Light Metal 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.