Correlation Between ENERGYMACHINERY KOREA and Hankuk Steel

Can any of the company-specific risk be diversified away by investing in both ENERGYMACHINERY KOREA and Hankuk Steel 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 ENERGYMACHINERY KOREA and Hankuk Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ENERGYMACHINERY KOREA CoLtd and Hankuk Steel Wire, you can compare the effects of market volatilities on ENERGYMACHINERY KOREA and Hankuk Steel 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 ENERGYMACHINERY KOREA with a short position of Hankuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENERGYMACHINERY KOREA and Hankuk Steel.

Diversification Opportunities for ENERGYMACHINERY KOREA and Hankuk Steel

-0.02

Correlation Coefficient

ENERGYMACHINERY KOREA  Hankuk Steel

Good diversification

The 3 months correlation between ENERGYMACHINERY and Hankuk is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and Hankuk Steel Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankuk Steel Wire and ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd are associated (or correlated) with Hankuk Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankuk Steel Wire has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and Hankuk Steel go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and Hankuk Steel

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to generate 0.56 times more return on investment than Hankuk Steel. However, ENERGYMACHINERY KOREA CoLtd is 1.79 times less risky than Hankuk Steel. It trades about 0.61 of its potential returns per unit of risk. Hankuk Steel Wire is currently generating about 0.09 per unit of risk. If you would invest  163,000  in ENERGYMACHINERY KOREA CoLtd on October 11, 2024 and sell it today you would earn a total of  67,500  from holding ENERGYMACHINERY KOREA CoLtd or generate 41.41% return on investment over 90 days.

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

ENERGYMACHINERY KOREA CoLtd  vs.  Hankuk Steel Wire

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ENERGYMACHINERY KOREA CoLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ENERGYMACHINERY KOREA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hankuk Steel Wire

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hankuk Steel Wire are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hankuk Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ENERGYMACHINERY KOREA and Hankuk Steel

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

The idea behind ENERGYMACHINERY KOREA CoLtd and Hankuk Steel Wire 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.