Correlation Between Hana Financial and RF Materials

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

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

Diversification Opportunities for Hana Financial and RF Materials

0.53

Correlation Coefficient

Hana Financial  RF Materials

Very weak diversification

The 3 months correlation between Hana and 327260 is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hana Financial and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Materials 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 RF Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Materials has no effect on the direction of Hana Financial i.e., Hana Financial and RF Materials go up and down completely randomly.

Pair Corralation between Hana Financial and RF Materials

Assuming the 90 days trading horizon Hana Financial is expected to under-perform the RF Materials. But the stock apears to be less risky and, when comparing its historical volatility, Hana Financial is 1.98 times less risky than RF Materials. The stock trades about -0.09 of its potential returns per unit of risk. The RF Materials Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  668,000  in RF Materials Co on October 25, 2024 and sell it today you would lose (95,000) from holding RF Materials Co or give up 14.22% of portfolio value over 90 days.

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

Hana Financial  vs.  RF Materials Co

Hana Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hana Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

RF Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RF Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hana Financial and RF Materials

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

The idea behind Hana Financial and RF Materials Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.