Correlation Between Hanwha Life and Shinsegae Engineering

Can any of the company-specific risk be diversified away by investing in both Hanwha Life and Shinsegae Engineering 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 Shinsegae Engineering 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 Shinsegae Engineering Construction, you can compare the effects of market volatilities on Hanwha Life and Shinsegae Engineering 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 Shinsegae Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanwha Life and Shinsegae Engineering.

Diversification Opportunities for Hanwha Life and Shinsegae Engineering

0.16

Correlation Coefficient

Hanwha Life  Shinsegae Engineering

Average diversification

The 3 months correlation between Hanwha and Shinsegae is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hanwha Life Insurance and Shinsegae Engineering Construc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Engineering 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 Shinsegae Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Engineering has no effect on the direction of Hanwha Life i.e., Hanwha Life and Shinsegae Engineering go up and down completely randomly.

Pair Corralation between Hanwha Life and Shinsegae Engineering

Assuming the 90 days trading horizon Hanwha Life Insurance is expected to generate 0.89 times more return on investment than Shinsegae Engineering. However, Hanwha Life Insurance is 1.13 times less risky than Shinsegae Engineering. It trades about 0.01 of its potential returns per unit of risk. Shinsegae Engineering Construction is currently generating about -0.01 per unit of risk. If you would invest  244,214  in Hanwha Life Insurance on October 26, 2024 and sell it today you would earn a total of  2,786  from holding Hanwha Life Insurance or generate 1.14% return on investment over 90 days.

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

Hanwha Life Insurance  vs.  Shinsegae Engineering Construc

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 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.

Shinsegae Engineering

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shinsegae Engineering Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shinsegae Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hanwha Life and Shinsegae Engineering

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

The idea behind Hanwha Life Insurance and Shinsegae Engineering Construction 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.