Correlation Between Hanwha Life and Korea Information

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

Diversification Opportunities for Hanwha Life and Korea Information

0.67

Correlation Coefficient

Hanwha Life  Korea Information

Poor diversification

The 3 months correlation between Hanwha and Korea is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hanwha Life Insurance and Korea Information Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Information 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 Korea Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Information has no effect on the direction of Hanwha Life i.e., Hanwha Life and Korea Information go up and down completely randomly.

Pair Corralation between Hanwha Life and Korea Information

Assuming the 90 days trading horizon Hanwha Life is expected to generate 2.85 times less return on investment than Korea Information. In addition to that, Hanwha Life is 1.1 times more volatile than Korea Information Engineering. It trades about 0.02 of its total potential returns per unit of risk. Korea Information Engineering is currently generating about 0.08 per unit of volatility. If you would invest  256,000  in Korea Information Engineering on December 23, 2024 and sell it today you would earn a total of  19,000  from holding Korea Information Engineering or generate 7.42% return on investment over 90 days.

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

Hanwha Life Insurance  vs.  Korea Information Engineering

Hanwha Life Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hanwha Life Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hanwha Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Korea Information

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Information Engineering are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Information may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hanwha Life and Korea Information

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

The idea behind Hanwha Life Insurance and Korea Information Engineering 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.