Correlation Between Dongwoo Farm and Hanwha Life

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

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

Diversification Opportunities for Dongwoo Farm and Hanwha Life

0.24

Correlation Coefficient

Dongwoo Farm  Hanwha Life

Modest diversification

The 3 months correlation between Dongwoo and Hanwha is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and Hanwha Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Life Insurance and Dongwoo Farm 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 Dongwoo Farm To are associated (or correlated) with Hanwha Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Life Insurance has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and Hanwha Life go up and down completely randomly.

Pair Corralation between Dongwoo Farm and Hanwha Life

Assuming the 90 days trading horizon Dongwoo Farm To is expected to generate 1.1 times more return on investment than Hanwha Life. However, Dongwoo Farm is 1.1 times more volatile than Hanwha Life Insurance. It trades about 0.13 of its potential returns per unit of risk. Hanwha Life Insurance is currently generating about -0.13 per unit of risk. If you would invest  190,800  in Dongwoo Farm To on October 26, 2024 and sell it today you would earn a total of  4,100  from holding Dongwoo Farm To or generate 2.15% return on investment over 90 days.

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

Dongwoo Farm To  vs.  Hanwha Life Insurance

Dongwoo Farm To

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongwoo Farm To has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dongwoo Farm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Dongwoo Farm and Hanwha Life

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

The idea behind Dongwoo Farm To and Hanwha Life Insurance 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.