Correlation Between Hana Financial and Samsung Fire

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

By analyzing existing cross correlation between Hana Financial and Samsung Fire Marine, you can compare the effects of market volatilities on Hana Financial and Samsung Fire 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 Hana Financial with a short position of Samsung Fire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hana Financial and Samsung Fire.

Diversification Opportunities for Hana Financial and Samsung Fire

0.7

Correlation Coefficient

Hana Financial  Samsung Fire

Poor diversification

The 3 months correlation between Hana and Samsung is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hana Financial and Samsung Fire Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Fire Marine and Hana Financial 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 Hana Financial are associated (or correlated) with Samsung Fire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Fire Marine has no effect on the direction of Hana Financial i.e., Hana Financial and Samsung Fire go up and down completely randomly.

Pair Corralation between Hana Financial and Samsung Fire

Assuming the 90 days trading horizon Hana Financial is expected to generate 1.02 times less return on investment than Samsung Fire. But when comparing it to its historical volatility, Hana Financial is 2.54 times less risky than Samsung Fire. It trades about 0.12 of its potential returns per unit of risk. Samsung Fire Marine is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  37,350,000  in Samsung Fire Marine on December 4, 2024 and sell it today you would earn a total of  900,000  from holding Samsung Fire Marine or generate 2.41% return on investment over 90 days.

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

Hana Financial  vs.  Samsung Fire Marine

Hana Financial

Risk-Adjusted Performance

Very Weak

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

Samsung Fire Marine

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hana Financial and Samsung Fire

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

The idea behind Hana Financial and Samsung Fire Marine 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.