Correlation Between WONIK Materials and HMM Co

Can any of the company-specific risk be diversified away by investing in both WONIK Materials and HMM Co 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 WONIK Materials and HMM Co into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WONIK Materials CoLtd and HMM Co, you can compare the effects of market volatilities on WONIK Materials and HMM Co 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 WONIK Materials with a short position of HMM Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of WONIK Materials and HMM Co.

Diversification Opportunities for WONIK Materials and HMM Co

0.49

Correlation Coefficient

WONIK Materials  HMM Co

Very weak diversification

The 3 months correlation between WONIK and HMM is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding WONIK Materials CoLtd and HMM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMM Co and WONIK Materials 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 WONIK Materials CoLtd are associated (or correlated) with HMM Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMM Co has no effect on the direction of WONIK Materials i.e., WONIK Materials and HMM Co go up and down completely randomly.

Pair Corralation between WONIK Materials and HMM Co

Assuming the 90 days trading horizon WONIK Materials CoLtd is expected to generate 1.09 times more return on investment than HMM Co. However, WONIK Materials is 1.09 times more volatile than HMM Co. It trades about 0.15 of its potential returns per unit of risk. HMM Co is currently generating about 0.1 per unit of risk. If you would invest  1,768,541  in WONIK Materials CoLtd on December 22, 2024 and sell it today you would earn a total of  446,459  from holding WONIK Materials CoLtd or generate 25.24% return on investment over 90 days.

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

WONIK Materials CoLtd  vs.  HMM Co

WONIK Materials CoLtd

Risk-Adjusted Performance

Good

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

HMM Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HMM Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HMM Co sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WONIK Materials and HMM Co

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

The idea behind WONIK Materials CoLtd and HMM Co 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.