Correlation Between TK Chemical and Hanwha Life

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

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

Diversification Opportunities for TK Chemical and Hanwha Life

-0.46

Correlation Coefficient

TK Chemical  Hanwha Life

Very good diversification

The 3 months correlation between 104480 and Hanwha is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding TK Chemical 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 TK Chemical 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 TK Chemical 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 TK Chemical i.e., TK Chemical and Hanwha Life go up and down completely randomly.

Pair Corralation between TK Chemical and Hanwha Life

Assuming the 90 days trading horizon TK Chemical is expected to under-perform the Hanwha Life. In addition to that, TK Chemical is 1.19 times more volatile than Hanwha Life Insurance. It trades about -0.04 of its total potential returns per unit of risk. Hanwha Life Insurance is currently generating about 0.01 per unit of volatility. If you would invest  246,590  in Hanwha Life Insurance on October 24, 2024 and sell it today you would earn a total of  4,910  from holding Hanwha Life Insurance or generate 1.99% return on investment over 90 days.

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

TK Chemical  vs.  Hanwha Life Insurance

TK Chemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TK Chemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TK Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with TK Chemical and Hanwha Life

The main advantage of trading using opposite TK Chemical and Hanwha Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TK Chemical 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 TK Chemical 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.