Correlation Between Hanwha Life and Kia Corp

Can any of the company-specific risk be diversified away by investing in both Hanwha Life and Kia Corp 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 Hanwha Life and Kia Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hanwha Life Insurance and Kia Corp, you can compare the effects of market volatilities on Hanwha Life and Kia Corp 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 Hanwha Life with a short position of Kia Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanwha Life and Kia Corp.

Diversification Opportunities for Hanwha Life and Kia Corp

-0.66

Correlation Coefficient

Hanwha Life  Kia Corp

Excellent diversification

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

Pair Corralation between Hanwha Life and Kia Corp

Assuming the 90 days trading horizon Hanwha Life is expected to generate 2.89 times less return on investment than Kia Corp. In addition to that, Hanwha Life is 1.04 times more volatile than Kia Corp. It trades about 0.01 of its total potential returns per unit of risk. Kia Corp is currently generating about 0.04 per unit of volatility. If you would invest  8,147,250  in Kia Corp on October 24, 2024 and sell it today you would earn a total of  2,152,750  from holding Kia Corp or generate 26.42% return on investment over 90 days.

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

Hanwha Life Insurance  vs.  Kia Corp

Hanwha Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanwha Life Insurance 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.

Kia Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kia Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kia Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanwha Life and Kia Corp

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

The idea behind Hanwha Life Insurance and Kia Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.