Correlation Between Hana Financial and Korea Aerospace

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

By analyzing existing cross correlation between Hana Financial and Korea Aerospace Industries, you can compare the effects of market volatilities on Hana Financial and Korea Aerospace 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 Korea Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hana Financial and Korea Aerospace.

Diversification Opportunities for Hana Financial and Korea Aerospace

0.66

Correlation Coefficient

Hana Financial  Korea Aerospace

Poor diversification

The 3 months correlation between Hana and Korea is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hana Financial and Korea Aerospace Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Aerospace Indu 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 Korea Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Aerospace Indu has no effect on the direction of Hana Financial i.e., Hana Financial and Korea Aerospace go up and down completely randomly.

Pair Corralation between Hana Financial and Korea Aerospace

Assuming the 90 days trading horizon Hana Financial is expected to generate 3.16 times less return on investment than Korea Aerospace. But when comparing it to its historical volatility, Hana Financial is 2.82 times less risky than Korea Aerospace. It trades about 0.14 of its potential returns per unit of risk. Korea Aerospace Industries is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5,490,000  in Korea Aerospace Industries on December 30, 2024 and sell it today you would earn a total of  1,980,000  from holding Korea Aerospace Industries or generate 36.07% 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.  Korea Aerospace Industries

Hana Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hana Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hana Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Korea Aerospace Indu

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Aerospace Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Aerospace sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hana Financial and Korea Aerospace

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

The idea behind Hana Financial and Korea Aerospace Industries 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.