Correlation Between Duksan Hi and Hanjoo Light

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

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

Diversification Opportunities for Duksan Hi and Hanjoo Light

0.96

Correlation Coefficient

Duksan Hi  Hanjoo Light

Almost no diversification

The 3 months correlation between Duksan and Hanjoo is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Duksan Hi Metal 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 Duksan Hi 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 Duksan Hi Metal 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 Duksan Hi i.e., Duksan Hi and Hanjoo Light go up and down completely randomly.

Pair Corralation between Duksan Hi and Hanjoo Light

Assuming the 90 days trading horizon Duksan Hi Metal is expected to generate 0.81 times more return on investment than Hanjoo Light. However, Duksan Hi Metal is 1.23 times less risky than Hanjoo Light. It trades about -0.08 of its potential returns per unit of risk. Hanjoo Light Metal is currently generating about -0.12 per unit of risk. If you would invest  767,000  in Duksan Hi Metal on September 25, 2024 and sell it today you would lose (375,000) from holding Duksan Hi Metal or give up 48.89% of portfolio value over 90 days.

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

Duksan Hi Metal  vs.  Hanjoo Light Metal

Duksan Hi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duksan Hi 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.

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 Duksan Hi and Hanjoo Light

The main advantage of trading using opposite Duksan Hi and Hanjoo Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duksan Hi 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 Duksan Hi Metal 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.