Correlation Between System and Han Kook

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

By analyzing existing cross correlation between System and Application and Han Kook Capital, you can compare the effects of market volatilities on System and Han Kook 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 System with a short position of Han Kook. Check out your portfolio center. Please also check ongoing floating volatility patterns of System and Han Kook.

Diversification Opportunities for System and Han Kook

0.14

Correlation Coefficient

System  Han Kook

Average diversification

The 3 months correlation between System and Han is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and Han Kook Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Han Kook Capital and System 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 System and Application are associated (or correlated) with Han Kook. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Han Kook Capital has no effect on the direction of System i.e., System and Han Kook go up and down completely randomly.

Pair Corralation between System and Han Kook

Assuming the 90 days trading horizon System and Application is expected to under-perform the Han Kook. In addition to that, System is 2.72 times more volatile than Han Kook Capital. It trades about -0.02 of its total potential returns per unit of risk. Han Kook Capital is currently generating about 0.08 per unit of volatility. If you would invest  54,050  in Han Kook Capital on December 22, 2024 and sell it today you would earn a total of  1,750  from holding Han Kook Capital or generate 3.24% return on investment over 90 days.

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

System and Application  vs.  Han Kook Capital

System and Application

Risk-Adjusted Performance

Very Weak

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

Han Kook Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Han Kook Capital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Han Kook is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with System and Han Kook

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

The idea behind System and Application and Han Kook Capital 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.