Correlation Between EBEST Investment and Hankuk Steel

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

By analyzing existing cross correlation between EBEST Investment Securities and Hankuk Steel Wire, you can compare the effects of market volatilities on EBEST Investment and Hankuk Steel 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 EBEST Investment with a short position of Hankuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBEST Investment and Hankuk Steel.

Diversification Opportunities for EBEST Investment and Hankuk Steel

-0.59

Correlation Coefficient

EBEST Investment  Hankuk Steel

Excellent diversification

The 3 months correlation between EBEST and Hankuk is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding EBEST Investment Securities and Hankuk Steel Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankuk Steel Wire and EBEST Investment 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 EBEST Investment Securities are associated (or correlated) with Hankuk Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankuk Steel Wire has no effect on the direction of EBEST Investment i.e., EBEST Investment and Hankuk Steel go up and down completely randomly.

Pair Corralation between EBEST Investment and Hankuk Steel

Assuming the 90 days trading horizon EBEST Investment Securities is expected to under-perform the Hankuk Steel. But the stock apears to be less risky and, when comparing its historical volatility, EBEST Investment Securities is 3.89 times less risky than Hankuk Steel. The stock trades about -0.12 of its potential returns per unit of risk. The Hankuk Steel Wire is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  287,000  in Hankuk Steel Wire on October 4, 2024 and sell it today you would earn a total of  114,000  from holding Hankuk Steel Wire or generate 39.72% return on investment over 90 days.

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

EBEST Investment Securities  vs.  Hankuk Steel Wire

EBEST Investment Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EBEST Investment Securities 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hankuk Steel Wire

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hankuk Steel Wire are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hankuk Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EBEST Investment and Hankuk Steel

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

The idea behind EBEST Investment Securities and Hankuk Steel Wire 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.